End-of-contract and annual best tariff notifications, and review of pricing practices in fixed broadband: Citizens Advice’s response to Ofcom’s consultation
Citizens Advice welcomes the opportunity to respond to Ofcom’s consultation on end-of-contract and annual best tariff notifications, as well as the proposed scope of the review of pricing practices in fixed broadband.
Each year, we estimate that consumers pay a loyalty penalty of £475m in mobile and £1,277m in broadband. Millions remain in their contracts after the minimum term has ended, and it is disengaged and vulnerable consumers who are hit hardest. The scale and severity of the loyalty penalty in telecoms requires urgent action.
In the mobile sector, the evidence of consumer detriment is clearly established, and swift action is needed. The proposed timetable set out by Ofcom - under which a final decision will not be made until March 2020 - is far too slow, particularly as any action the regulator takes will likely give companies a lead-in time of at least 6 months to implement. Ofcom must end the practice of charging consumers for a handset they have already paid off as soon as possible, by ensuring that providers selling bundled contracts are clear about the respective costs of the airtime and handset elements and automatically apply a handset discount at the end of the minimum term.
Specific remedies in the broadband sector will, as they should, be informed by Ofcom’s comprehensive review of pricing practices. But these proposals should be sufficiently impactful and ambitious, not simply further demand-side remedies. And prompt action is also required here as well - each month that passes costs loyal broadband consumers £100m. In our view, Ofcom’s review should also incorporate triple-play, despite the complexity this may bring.
We broadly agree with Ofcom’s proposals on notifications but remain of the view that further improvements are necessary. Ofcom should:
Strengthen the impact of its Randomised Control Trials (RCTs) by mandating providers to comply with the most effective notification content and format.
Shorten the implementation timescale further, especially for already out-of-contract consumers.
Reconsider the proposal that providers can send notifications through any durable medium instead of consumers’ preferred medium.
Expand the scope of planned monitoring and evaluation activities to identify the most effective approaches and commit to review guidance in future if necessary.
Collect more data on long-term out-of-contract consumers to assess whether further interventions may be required for the most disengaged consumers.
While a step in the right direction, notifications alone are insufficient to stop the loyalty penalty in telecoms - Ofcom should bring forward additional robust proposals promptly.