Better consumer protection and encouragement to shop around has not overcome consumers' inertia
Ofcom, the UK telecoms regulator, is claiming to have saved British telecoms consumers millions of pounds since its new rules and awareness campaigns kicked in.
Ofcome states 1.3 million broadband users have secured better deals since introducing prompts to shop around and also that overpayment among mobile customers has dropped by £100 million, after operators committed to cut prices when initial contracts end.
In addition, vulnerable broadband customers who are out of contract have greater protection from higher prices. Still, it looks like there’s still plenty of scope for more savings.
Last year, 62% of broadband customers who were nearing the end of their contract either signed up to a new deal with their provider, or switched to a new one when the deal ended. This is up from 47% of customers who took action in 2019 rather than just continued with their provider.
The number of broadband customers who are out of contract fell from 8.7 million (40%) in 2019 to 7.4 million (35%) in 2020. On average, these customers pay around £5.10 per month more than they need to.
Equity research firm Jefferies comments that Ofcom’s “report reveals that 40% of BB [broadband] subs[cribers] still out-of-contract (OOC) [which] Implies customer inertia still high.
"ARPU differential between OOC and re-contracting BB subs is £5.10 at BT, but £7.40 Sky and £14.40 Virgin. Implies more flexibility for BT to discount front-book if needed, without risking churn on back-book.”
In other words, Jefferies thinks Ofcom's activities have given BT more room for manoeuvre. Also note, regarding the graphic below, BT owns Plusnet, and, as Jefferies observes, the regulator is not intending to intervene further on this matter.
Jefferies also notes, "In light of ~9% price increases coming up in March, Ofcom said it 'recognise[s] that it will require significant investment from private companies to upgrade the UK’s networks, so they are fit for the future, and that this may lead to price increases for consumers in the short-term,', but 'we strongly encourage providers to consider the wider impact on the cost of living of further above-inflation price increases in 2022'."
See more information on Ofcom’s report here.