More than 20 million customers could save one-fifth on the cost of their landline, broadband, TV and mobile packages after a ruling by Ofcom.
The broadcasting and media regulator has introduced rules forcing broadband, TV and phone companies to tell customers when their contracts are coming to an end, and alert them to the best deals available from their current provider.
Ofcom research has found more than 20 million customers have passed their initial contract period. The regulator found people who bundle their landline and broadband services together pay, on average, about 20% more when they are out of contract and have not shopped around. This rises to 26% among customers who bundle their pay TV with these two services.
“We’re making sure customers are treated fairly, by making companies give them the information they need, when they need it,” said Ofcom’s consumer group director, Lindsey Fussell. “This will put power in the hands of millions of people who are paying more than necessary when they’re no longer tied to a contract.”
Under the new rules, telecoms and pay TV companies will be forced to warn customers between 10 and 40 days before their contract comes to an end. These alerts will be sent by text, email or letter, similar to other sectors such as insurance and energy providers. Customers will start receiving the alerts from 15 February next year.
Richard Neudegg, the head of regulation at uSwitch, said: “Ofcom is finally moving the telecoms sector towards what consumers have come to expect in other areas such as energy and insurance.
“This is an important step by the regulator to address what has long been a clearly unacceptable gap in the rules, penalising consumers to the tune of millions.”
Uswitch estimates UK consumers are paying as much as £3.5m extra a day when out of contract and not on the best deals.
“More than £350m has already been wasted since the [Ofcom] consultation closed in February,” said Neudegg.
Holly Niblett, head of digital at comparethemarket.com, said that Ofcom’s move will end “inexcusable” and “exploitative” business behaviour by telecommunications companies.
“This is a milestone in consumer telecoms,” she said. “The practice of rolling people onto uncompetitive end-of-contract packages without telling them is inexcusable and has gone on for far too long. We all lead busy lives and it is easy to forget the exact date your contract expires. Companies have been exploiting this forgetfulness for years.”
Last month, Ofcom unveiled a scheme under which most broadband and landline customers will receive money back from their providers when things go wrong, without having to ask.
Only about one in seven broadband or landline customers inconvenienced by delayed repairs, installations or missed engineer appointments have received compensation from their providers, and only in small amounts.
BT, Sky, TalkTalk, Virgin Media, Zen Internet, Hyperoptic and Vodafone have agreed to the terms of the scheme and will start paying compensation automatically later this year.
Ofcom has also been tackling the issue of operators making it difficult for customers to change mobile phone provider. One of the biggest hurdles in changing provider is having to speak to your current one, and facing unwanted attempts to persuade you to stay.
From July, mobile customers will be able to switch to a new provider by notifying their existing company with one free text.
The rules will also put an end to charging leavers for a notice period, which is costing UK mobile customers £10m a year, as they are paying for the overlap of new and old contracts for a period after they switch.