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.Extract from Citizens Advice Press Release
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.