The telecoms regulator, Ofcom, has announced that broadband companies will cut prices for customers who are out of contract.
Ofcom recently conducted a review of pricing practices currently used by broadband providers, and found that 'out of contract' customers usually pay higher fees. In fact, our own analysis of deals currently available from the major providers found that the average price increase would be a substantial 26%.
Ofcom has set out a series of measures to ensure out-of-contract customers pay fairer tariffs. It also plans to implement new measures protecting vulnerable broadband customers from high prices.
Most deals from the major UK broadband providers are offered with a fixed-term contract lasting either 12, 18 or 24 months. After this period, prices will automatically rise from an 'introductory' tariff to a 'standard' price.
While we found the average price increase for deals starting in September 2019 would be 26%, some prices will jump up by much more. In the worst example, customers signing up to M100 broadband and phone deal would see their price rise from £26 per month to £49 monthly after 12 months - an increase of 88.5%.
Ofcom's research found that 8.8 million customers - 40% of broadband customers - are out of contract and likely to be paying more as a result. It also found that people who sign a new deal with their provider typically pay £8-9 less per month than customers who remain out of contract.
Ofcom says it has challenged broadband companies to make prices fairer for out-of-contract customers. The UK's largest providers have each made commitments to help ensure that longstanding customers aren't overcharged:
Most of these commitments will come into effect by March 2020.
Caroline Normand, Which? Director of Advocacy, said:
'We know that many UK households can end up paying over the odds for their broadband if they stay on the same tariff for too long, so action from regulators and the industry to help these customers is a step in the right direction.
'Ofcom will need to closely monitor and report on how the voluntary commitments that providers make are working and ensure that this is encouraging customers to contact their supplier or switch in order to save money, especially as often a faster service is available at a lower price.
'These changes won't happen overnight so if you are unhappy with your internet service or you think you could be paying too much, you should still look for a better deal - as this could save you hundreds of pounds a year.'
Ofcom has also expressed particular concern about the treatment of vulnerable customers - those who might lack the confidence to navigate the broadband market or to negotiate with their provider over price. It notes that customers may be vulnerable temporarily or permanently due to physical or mental health problems, age, literacy or changes in personal circumstances (such as bereavement or job loss).
It has proposed a guide for how providers can identify and help vulnerable customers, provide them with adequate support and treat them fairly. The proposed measures include offering a wide range of communication channels, providing accessible written communications and implementing specialist customer service teams to work with vulnerable customers.
It is currently seeking views from providers and other interested parties on the proposed measures - this consultation will close in November.