Ofcom yesterday announced new plans to prevent consumers being ripped off by mobile phone, broadband, fixed line and TV companies when their initial introductory contracts come to an end.
They is proposing that all providers start notifying customers when their minimum contract commitments are coming to an end to give them the opportunity to shop around for other deals with other providers or to negotiate better deals with their existing ones at the end of their contracts.
Ofcom estimates that 20 million people are currently outside of their minimum contract term and 10 million of those are on higher priced deals than they had been when inside their contract term. Overall this costs the consumers tens of millions of pounds.
The regulator proposes that companies should notify their customers up to two months in advance of their deal coming to an end any changes to their price plan that may result in not negotiating a new contract. This should give consumers a good deal of time to compare deals across the market or come to a new agreement with their existing service provider.
Which looked into the sorts of price increases that kicked in when customers finished their minimum contract term:
BT Broadband - £24.99 rises to £45.59 after 18 months, that's an increase of 82%
Virgin TV & Broadband - £29.00 rises to £48.00 after 12 months, an increase of 66%
Sky - £18.00 rises to £30.00 after 12 months, an increase of 67%
In the mobile space, we've seen regular increases of around 40% at the end of a 12 month sim-only deal.
What will this mean for consumers?
These proposals should mean that consumers save money in the long term, although we expect these companies to resist these proposals in the first instance and then begrudgingly implement them.
We'd be concerned, however that there will be an increase in attractive "new customers" only deals that result in poor deals for loyal customers as the operators try to make up the difference in their profits from these proposals.
Expect this to be combined with more of what's called "multi-play", with aggressive sales of bundled TV, broadband, mobile and landline packages which make it harder for customers to leave a company once they are in, even if the deals for individual elements of that deal become unattractive. We think we'll start to see the value of bundled packages start to reduce as a result of these proposals making it cheaper once more to mix and match providers.
One thing that's for certain is that these companies aren't going to let you leave for someone else without a fight.
Of course, we're always on available on Messenger to help you find a better deal on your mobile phone.