Ofcom gets more providers on board with saving broadband customers money
Ofcom seems have secured fairer treatment for customers of a wider number of providers and this will mean that the price gap between those enjoying new customer pricing and loyal customers who have stayed with a provider a few years should diminish.
The changes announced today are:
- EE, Plusnet and Sky will automatically reduce prices for vulnerable customers who are out of contract. It is not totally clear if this is an automatic price match to new customer pricing, or just something much closer. With some providers varying new customer pricing every few days it is difficult to know what is the normal new customer price.
- EE and Plusnet is also giving all existing customers access to new customer pricing. This is not automatic, so if you are happy to remain with a provider you will need to contact them to get the new price.
This builds on the commitment made last September from BT, TalkTalk and Virgin Media to reduce prices automatically for vulnerable customers who are out of contract.
The Ofcom press release does not seem to cover this, but for the automatic reductions we presume that these customers are not automatically tied into a new additional minimum term. Currently automatically extending broadband contracts are not allowed, beyond the rolling 1 month contract that everyone enters after their minimum term ends.
For existing customers who do contact providers to get a new deal, either at a new customer price or at least something less than what they pay today, there will in return for the price reduction be an additional minimum term, often 18 or 24 months, but some might be as short as 12 months.
Saving the public money is great, but there are some concerns around actively encouraging millions to effectively always be in a 12 to 24 month minimum term and this also happening at a time when there is a wave of new full fibre networks appearing across the UK.
The traditional accounting method for countering such broad reductions in what the public are paying are to increase the pricing for new customers which may dampen the switching market even further than people just staying with the devil they know provider as the price deal they can get is only marginally more expensive than competitors deals. Other tricks are to increase things like the cost of postage for the broadband router or charge higher setup fees. Additionally the upsell of other services will increase e.g. mesh Wi-Fi systems that you rent.
That TalkTalk had the lowest number customers out of contract is the result of their out of contract offers which for some time matched the current best offer new customer pricing. Virgin Media with 62% of customers out of contract stands out head and shoulders above the rest, we believe this is because of factors such as the TV bundles, along with them currently being the dominant ultrafast broadband provider in the UK.