Broadband News

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.

Ofcom graphic showing impact of out of contract pricing
Ofcom infographic of proportion of customers who are out of contract with major broadband providers and average price impact this represents

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.

Comments

Been a VM customer since eurobell mainly because it was the only choice when we moved in as we did'nt have a BT line. For the last 2 years we have been what they call suitcased (out of contract) but still paying over £100 for a package they have not had for 2 years. The new deals give more than we have now for half the price for 6 months then £78 after that. They wont let us have new customer deal and can only reduce our bill by £10. Quote them on last years promise of out of contract bill reduction and you get cut off only to call back and speak to someone clueless in India.

  • LT38
  • 13 days ago

@LT38
Can you not give notice and then set up a new contract in the name of someone else in your household?

  • dandodex
  • 12 days ago

I happened to login to my Plusnet FTTC account a little less than 2 months before it was due to expire. There I found an offer which I decided to accept rather than move to another supplier. If they had told me in an email that they would make an offer I would have looked for it. I had only logged into to the account to check the expiry date. It is not something I do often.

  • Michael_Chare
  • 11 days ago

I would like to see minimum contracts disappear altogether - it shows lack of confidence by the supplier in my opinion. (Customers to pay for supplied router if leaving within a certain time would sound fair). I recently moved my mobile provider to giffgaff which is a monthly contract but at £6/month, for unlimited minutes/500MB data and a good service, the only reason to leave would be if it became unreliable. A few years ago I was with Newnet BB on a monthly contract and at the time they advertised just that - offer a good service at the right price on a monthly contract and customers will stay.

  • zhango
  • 8 days ago

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