End of contract warnings could save broadband users £1 billion a year – but Ofcom set to miss the mark
Forcing providers to tell customers their deals are about to end could see broadband users pocket more than £1bn in annual savings – but timing is key
Ofcom currently proposing 40-70 day notification period – however, this could result in early contract termination charges for consumers
Nearly eight in 10 (77%) consumers suggest being notified 21 days or more before their contract ends is too early
Uswitch.com is calling on Ofcom to help customers avoid inflated out-of-contract charges for the same service by making sure they are warned at the right moment to take action – between 14 and 21 days before the end of contract.
The introduction of warning notices informing broadband customers that their contracts are about to end could save consumers a staggering £1 billion a year. But according to new consumer research by Uswitch.com, the price comparison and switching service, the proposed timing for the notices could render the warnings ineffective.
Many consumers are unaware that providers often hike fees by an average 62% as soon as their initial contract expires. As a result, Ofcom is currently considering whether to make providers tell customers that their current contract is about to end, prompting them to consider the savings they could make by exploring other options. Research suggests that the regulator’s proposed messaging would prompt three quarters (74%) of broadband users to act on this notification.
Critically, however, the new research reveals that savings could go to waste if customers are not told about their deals ending in a timely manner. Ofcom’s current suggestion of a notice being delivered 40-70 days before a contract finishes would mean customers would have to pay an early termination fee if they decided to leave at that time. And with over three quarters (77%) of broadband customers saying that 21 days or more before their contract ending is too early to receive any form of notification, the suggested window for these letters to be sent out needs to be reduced significantly. The current proposals could lead to more than £845m of this windfall being unclaimed if these early notifications put customers off looking for a better deal when their term ends.
Given that across other industries, such as energy and insurance, notifications at the end of a contracted period are standard practice, it is unsurprising that the vast majority of broadband users (87%) say they are bothered or annoyed by the lack of notices which could potentially save them money.
Richard Neudegg, head of regulation at Uswitch.com**,** comments: “Broadband contracts are one of many things we have to juggle when running a home and so can easily get buried in the noise of everyday life. That’s why the timing of notices warning customers that their contracts are due to end is so key, as it’s not reasonable for consumers to have to commit to memory the exact date every contract ends.
“Providers have gotten away with not having to supply this very basic information for years, with consumers losing billions in the process. Allowing companies to notify customers a whopping 70 days before their packages are due to end – as Ofcom is suggesting – risks letting providers get off scot-free as the information is not yet relevant and exit penalties still apply.
“The other big factor is the actual content of the notices. Our research suggests that more consumers would be prompted to search for a better deal if more information is given about contract costs. It’s important to be really clear on what the longer term costs of sticking with an expired deal actually are and making clear there are other options..
“The regulator has a real chance to address these issues that have kept customers in the dark for far too long – but unless these notifications are optimally designed to encourage consumers to engage with the market, they will effectively maintain the status quo. Broadband and mobile providers lag far behind other industries, and with every day they are not required to send out an end of contract notification costing customers millions, these proposals cannot be implemented soon enough.”
Uswitch’s Connectivity without Complexity campaign has been looking at these key issues and exploring their impact on consumers. We believe it’s time the industry gave the facts – being open and upfront with the information that matters, removed the needless hoops that consumers are made to jump through and worked to ensure the road to faster, more reliable connectivity is a journey for all. To find out more, visit www.uswitch.com/connectivity**.**
FOR MORE INFORMATION
Rory Stoves
Phone: 020 3872 5613
Email: rory.stoves@uswitch.com
Twitter: @UswitchPR
Notes to editors
Opinium surveyed a sample of 2,006 UK adults from the 21st to 24th September 2018. Results have been weighted to reflect a nationally representative criteria.
Respondents were asked: ‘To your knowledge, has your broadband contract expired? Please think if you have gone over the initial term of the contract e.g. 12 months, but you are still paying for a broadband package.’ 27% answered ‘yes’ and 10% answered ‘don’t know’. Respondents were also asked: ‘How likely would the following encourage you to act: You may be able to make savings by exploring the available options’. 74% of those who said their broadband contracts had expired or they didn’t know answered ‘likely’. 74% of 37% = 27.38% of all broadband users who would be likely to act. There are 26.2 million fixed broadband connections in the UK. 27% of 26.2 million is 7,074,000. Average saving for ADSL BB users switching is £12.70 p/m. Average saving for fibre users switching is £13.17 p/m. Mean of the two is £12.94 p/m. £12.9412 = £155.28 7,074,000 155.28 = £1,098,450,720 p/a
Respondents were asked: ‘With this in mind, when do you think would be too early for you to receive a notification to give you enough time to act ahead of your contract ending? Please think of time to compare the options available to you, or switching your deal or provider’ 12% said ‘up to 21 days before contract ending’, 38% said ‘up to 30 days before contract ending’, 16% said ‘up to 2 months before contract ending’, 5% said ‘up to 3 months before contract ending’, 2% said ‘up to 6 months before contract ending’ and 4% said ‘over 6 months before contract ending. 12% + 38% + 16% + 5% + 2% + 4% = 77%. 77% of £1,098,450,720 = £845,807,054
Respondents were asked: ‘Unlike with household services such as energy contracts, mobile networks and broadband providers are not required to inform customers when their contracts are coming to an end, potentially stopping them from saving money. On a scale of 1 to 5, in which 1 is not at all bothered and 5 is very annoyed, how does this make you feel?’ 87% said ‘bothered’ or ‘annoyed’.
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