Broadband News

Are you a broadband customer who throws money down the drain?

Regulation to protect us from unfair business practices is unfortunately still needed today and while some may feel tempted to sit back and let this latest super complaint from Citizens Advice to play out our advice is to be pro-active and dig through your pile of paperwork or emails to check what date various contracts you have for broadband, mobile and insurance are due and set reminders to shop around before any service auto-renews or flips to a rolling contract with a higher price.

Research by Citizens Advice found that across 5 essential markets (mobile, broadband, home insurance, mortgages and savings):

    • British consumers lose £4.1 billion a year to the loyalty penalty.
    • 8 in 10 people are paying a significantly higher price, in at least one of the markets, for remaining with their existing supplier.
    • The loyalty penalty is, on average, £877 per year - equal to 3% of the average household’s total annual expenditure.

It beggars belief that companies in regulated markets can get away with routinely punishing their customers simply for being loyal. As a result of this super-complaint, the CMA should come up with concrete measures to end this systematic scam' says Citizens Advice Chief Executive Gillian Guy.

The example people will be seeing a lot of in the next day or so when talking about broadband, is the BT Consumer Unlimited ADSL2+ service which is on offer at £24.99/m for 18 months but the standard price jumps to £45.49/m if you let the service lapse into a simple rolling 30 day contract after 18 months. Ofcom is working towards a notification system for broadband contracts so at the end of the minimum term your existing provider will contact you to let you know and give you the opportunity to agree another contract or shop around. Many other providers have higher pricing when out of contract but the BT ADSL2+ service is one of the worst examples.

If you are out of contract and are actually happy with your broadband service then the best advice is to first research the price offered to new customers (ignore the free gifts as you will not get those) and then check the providers customer portal there may be an offer for existing customers or maybe faster broadband options that are at a lower price than your existing out of contract service. If the a providers online portal does not have an offer for you, then it is time to pick up the phone and haggle - it is possible to get the new customer price sometimes or at least meet somewhere in between the two.

ISPA fully supports efforts to encourage customers to engage with the market, and there is, naturally, a clear need to engage with vulnerable customers to provide support and help with switching. ISPA members are working hard to ensure that appropriate help is offered and we support Ofcom’s consultation on the introduction of end of contract notifications which will further enhance consumer engagement.

With a consultation ongoing, we feel that Citizen Advice is jumping the gun in relation to the broadband market and we are concerned that the narrative of a “loyalty penalty” conflates customer loyalty with ill-informed or unengaged customers. Loyalty to a provider does not necessarily mean that a customer is not content with their service, especially as in the broadband sector there are a range of non-price issues that the customer may value, including performance, service quality, and reliability.

Furthermore, the choice available to consumers in the retail broadband market is wide and the introductory offers made available by many providers are a function of a competitive market and help to keep prices low overall.

ISPA response to the super-complaint raised by Citizens Advice regarding ‘loyalty penalties’

The ISPA comment is probably not going to get as much coverage as it deserves because it is measured and has now headline grabbing figure of £4.1 billion, but there is a lot truth to it and with so many long term customers invested with a specific provider for reasons such as email address, have actually had course to use support and was happy with the support offered.

We think there are a number of categories of broadband customer and in no particular order:

  • Broadband users who have used price rises to enjoy the free gifts but with regular price rises are moving around every 6 to 9 months via the get out of contract free rules. For these customers it is possible to be enjoying a VDSL2/FTTC partial fibre service for under £20/m include (as per price rules all prices mentioned include telephone line rental if required).
  • Broadband users who at the end of the minimum term shop around for the next best deal, thus getting the free gifts but less frequently than the money saving experts.
  • Those who may have switched once or twice and have now found a broadband provider they are happy with, but have not chased for discounts, possibly because they are wanting to retain freedom to move as they can see a new broadband technology is coming soon to their street.
  • Those who simply have missed that their broadband service is out of contract and the price difference was small enough that they did not notice it on their bank account, and if paying by direct debit this also means they ignored the change notification message.
  • The real disengaged customers, who cannot remember what year they joined their provider, or even know what speed their broadband is or what speed it should be, and also have probably never looked to see if a better (speed/reliability) broadband connection is available.

The super complaint is probably going to be a big help to the final group and if regulators do take action could see those people paying less for their broadband, but if that was to happen it is likely that those in the first two groups will find the offers are less attractive.

Those in the first group i.e. the real experts at flipping for the best deal are finding it harder to get good deals as increasing numbers of providers are offering fixed price guarantees, so whereas you could almost predict another move in 6 to 9 months people with the guarantees the early exit route is lost.

With full fibre (Fibre to the Premises) appearing and some of this via vertically integrated operations i.e. no retail competition people and regulators need to be aware that very cheap deals to get people to upgrade from partial fibre services and ADSL2+ may find people at the end of 12 or 18 month contracts with little or no choice of provider and there is a risk that retailers may exploit that with price rises.

Comments

The market is artificial due to Openreach's monopoly. By owning the infrastructure and controlling the wholesale pricing, the cost to the communication provider is fixed. They have therefore developed a business model using loyal customers to subsidise discounts for new joiners.

If new customers were charged the same as existing, the prices for new contracts would increase and back office support staff would be cut to maintain margins resulting in worse customer service.

  • mikel543
  • 2 months ago

@thinkbroadband Yeah, get shafted £57 / month for 7 Mbps fibre!

  • @boxmodz
  • comment via twitter
  • 2 months ago

@mikel543 What Openreach monopoly? Ever heard of Virgin Media, Hyperoptic, GigaClear, Kingston, See the Light, etc, etc, etc? That Openreach operate in more areas than the others isn't a monopoly as I am unaware of Openreach ever having attempted to prevent one of those other companies or more from operating in an area or providing competition. It could just be because those other companies don't consider a particular area, yours perhaps, to be commercially viable. See Andrew's news item a few days ago where he reported VM are now at 51% coverage.

  • MCM999
  • 2 months ago

The problem with this is they look at the extra cost to an individual customer and then scale it up to the whole market.

If ISPs had to lower their top prices, they’d have an equivalent increase at the lower end as they need to generate the same amount of revenue irrelevant of the variation in their pricing.

The net result would be less variation in prices and so a more stagnant market place.

If I need to switch ISP every few years I’d rather do so to keep my price low.

  • Kr1s69
  • 2 months ago

I must say I've never yet had to switch in order to keep a competitive price for broadband. What I have needed to do is research the market so that I know what the "going rate" is in the market generally, and then contact my ISP and explain, in a friendly manner, that I have no wish to switch to another provider, but that in order to stay, I need to be offered a matching rate.

I've been with my ISP for 15 years

  • 961a
  • 2 months ago

I hate this type of competition. Having to switch every time your contract comes to an end.
This now includes most things. Electricity, Car insurance, Mobile the list goes on.
Why should you have to haggle for being loyal,
I won't out of principle, I just switch and if more people did the same problem solved.

  • nobroadband
  • 2 months ago

@961a
Would you mind saying which ISP you have and what you're paying?

It obviously can't be a large provider as they'd end the call after about 2 minutes quoting their official prices.

I'm assuming you're not paying the same amount for 15 years either.

The Government officially recommend shopping around for utilities as they think it's a good enough method to keep prices down. Not sure this complaint will get far

  • fusen
  • 2 months ago

fusen

Obviously I'm not paying the same amount I was 15 years ago at a time when I was on dial up. Currently I'm paying £22 per month for unlimited fibre broadband inc line rental.

"It obviously can't be a large provider as they'd end the call after about 2 minutes quoting their official prices"

You've obviously not tried hard enough. It does work if you are polite, emphasise you want to stay but you will go unless they come across with a competitive price, and make sure you have accurate figures of the prices available in your area for a similar product

  • 961a
  • 2 months ago

MCM999 - you need to look at the availability away from large towns... 100s of miles away, quite often only has BT based internet...

There is also patchy coverage in 'greater london' !! My mate lives 5 miles away, and gets full speed 80Mbps from sky, but it is NOT available for me.. :(

I am on virgin media, but I rarely get the rated 150M speed, more like 70 or 80..
(yes, speedtest says 150, but it is difficult to find a website that will do full 150..)

Too many fibre companies are too busy saying 'everywhere' - yet when you check, it not many places!!!

  • comnut
  • 2 months ago

@comnut It appears that you are unable to distinguish between monopoly and lack of competition. Openreach is not a monopoly although in some areas it may be the only supplier due to other potential suppliers having decided that they don't wish to install their own network, possibly because they consider doing so to be uneconomic. Nevertheless even where Openreach is the only company physically connecting to a property many different ISPs are able to use that connection in the same way that the many different electricity suppliers all use the same cables to supply to a property.

  • MCM999
  • 2 months ago

The choice of ISP makes no difference to the poor infrastructure provided by BT Wholesale when they are sole provider.

  • brianhe
  • 2 months ago

we would of not been in this place right now if BT FTTP was blocked in 1990 (we be like some other countries that have full fibre)

virgin would actually have competition on speed (but not reliability)

  • leexgx
  • 2 months ago

On the other hand some folk deserved to be ripped off by these companies ?

Last month I went on the Virgin Media forums to complain about the way that VM raise prices at a rate way over the inflation rate and could not believe I was being shot down by the folk who are actually being ripped off.

One guy gave an SA on how inflation is worked out and others where say how good VM TV is and well worth the inflated rises.

So for me I’m happy for them to be ripped off because it gives VM more leeway to give me a bigger discount loyalty bonus and a free upgrade.

  • cks22
  • 2 months ago

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