Ofcom brings fairer pricing for vulnerable and out of contract customers
The wild west for selling broadband finished a long time ago but there are still times when you can feel like you are dealing with a dodgy sales person when dealing with your ISP and only find out the truth in 18 months. Step forward Ofcom who has been working on ensuring a fairer deal for telecoms and broadband customers, particularly the vulnerable and those who don't engage with the market.
Some of the key changes are already appearing as announcements from broadband providers as their marketing teams try to put themselves a step above their competitors but the summary is:
- BT, Sky and TalkTalk will allow their out-of-contract customers to get the same deals as new customers, when they take out a new contract.
- The difference that any of Sky’s newly contracted customers will pay when their contract expires is no more than £5 per month.
- From February, BT will cap the difference that existing in-contract customers pay when their contracts expire – it will confirm the amount of this cap in due course.
- BT customers without access to superfast broadband will no longer pay more than entry-level superfast customers. And BT will provide a one-off automatic price reduction for vulnerable customers who are currently out of contract on more expensive deals.
- TalkTalk and Virgin Media will carry out annual price reviews with their vulnerable customers to ensure they are on the best deal for their needs, providing automatic discounts where appropriate if customers do not respond.
- BT, EE, Plusnet and TalkTalk will protect out-of-contract customers from above-inflation price rises.
Don't expect all of these changes to be in effect today, but they should be in effect by March 2020. On the same deals for existing customers as new customers we think that it will take some time to see how the providers will handle the comparison site market. This worry is because affiliate deals that are sometimes better than you can get by going direct to a providers website, plus the complication of vouchers, cashback and free gifts that are usually only for new customers. The comparison site market and the competition that exists between them is not what the fairness commitments are about, since if using a comparison market you are probably defined as an engaged customer. A case in point is the 55/10 VDSL2/FTTC service from BT, which we link to as £28.99/m but we can also build links where you pay £29.99/m.
One potential side effect that we presume Ofcom will be monitoring is that with this push to shift people from out of contract pricing into new 12/18/24 month deals while it will be fairer for the consumer and actually save people money it may have a negative effect for new entrants to the broadband market and with the wide range of new full fibre entrants this is important. Also as some full fibre operators offer decent discounts if you have the service installed while they are still working in an area people waiting for the 6 to 9 months of an existing contract to end might end up paying £100 install fees.
Switching a standard broadband and phone package is pretty simple already since you just sign-up with the new provider of your choice who tell the old provider (via the wholesaler) that you are migrating, but Ofcom is working to make this even simpler and is looking to embark on a set of trials to assess different ways to help people shop around. No detail is apparent on that the trials will involve beyond that trials like this are relatively new for Ofcom and the regulator will use its powers to compel providers to take part, since switching/re-contracting trials may affect revenue for a provider.
One problem we foresee with the switching trials is again linked to the comparison site market, i.e. if provider A is made to share details of a competitors pricing which pricing does it share, the standard price when you visit their dot com site or the special deal only available to subscribers of an email newsletter run by a financial website. Also with a number of broadband providers there are tweaks to the pricing every week e.g. Plusnet offers mean tweaks to contract length/monthly price/setup fee/cashback/voucher/url almost every week. For the vulnerable and disengaged customers this is less of an issue but there is scope for people missing the best deals if they assume that due to being 'Ofcom approved' this will be the best deal out there.
We used to try and keep a record of the myriad of price changes so that in theory we could provide a stock market style ticker so people could see if the current price was higher or lower compared to other points in time, but the time involved and other complications mean this never got off the ground.
Another area where it is very easy for the public to be misled is the speed information providers supply, we already find some forum visitors questioning why such widely varying point of sales estimates exist when it is the same identical line and broadband technology between providers. There is also the marketing battle to make the average peak time speed shown in adverts to be marginally higher than competitors.