New rules from next Saturday will force companies offering broadband and home phone deals to tell customers what they were paying on their old contract and how much their bill is going up, in a move designed to encourage users to shop around.
It follows research by Ofcom which found that 20m households are no longer on their provider’s initial contract – and overpaying as a result.
Customers who bundle their landline and broadband together typically pay 20% more if they are out of contract, the media regulator warned. The “loyalty price premium” rises to 26%, or £10 a month, for customers who add paid-for TV services as well, it says.
From 15 February telecoms and pay TV companies will have to write to customers at least 10 days before their contract ends, to warn that it is expiring and setting out what they will pay in future. It follows similar rules in the home and car insurance sectors, where customers have been lured in with discounted prices in the first year, only to see prices rise in subsequent years if they remain with that supplier.
Insurers are now required to prominently set out what the householders paid the previous year, compared to the new annual premium. Ofcom says its new alerts will be sent by text, email or letter but must include:
• Their contract end date.
• The price paid before this date.
• Any changes to the service and price paid at the end of this period.
• Information about any notice period required to end the contract.
• The best deals offered by the provider, including telling loyal customers what prices are available to new customers.
People who choose to stay with their provider without signing up to a new contract will have to be sent a reminder every year about their firm’s best deals, under the new code. The new rules will not apply to shorter monthly (30-day rolling) contracts.
The measure ties in with the UK’s implementation of the European Union’s electronic communications code which was agreed prior to Brexit.
Lindsey Fussell, Ofcom’s consumer director, says: “We’re making sure customers are treated fairly, by making companies give them the information they need, when they need it. 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.”
She says that about one in seven customers don’t know whether they are still tied to their original deal; and around one in eight believe they are “in contract”, but don’t know when this period ends.
Households who have not switched broadband provider in recent years are in for a nice surprise.
Plusnet and the Post Office have the cheapest basic broadband at £16-£18 a month, according to Broadbandchoices.co.uk. Plusnet’s package costs £17.99 a month for a 12-month contract – but comes with £60 cashback.
For those wanting a faster fibre 38Mb-plus service, you’ll pay around £23 a month from a host of firms including Plusnet, TalkTalk, Vodafone, SSE and the Post Office. Landline charges are included, while calls are on top. Contracts last 12-18 months depending on provider.