Mobile phone users will no longer be billed for their handsets long after they’ve paid them off, under a new ‘deal’ for consumers proposed by telecoms regulator Ofcom.
The regulator has announced a series of measures to combat consumer inertia and confusion in the mobile market, which it says are costing consumers £182 million a year.
According to Ofcom’s estimates, 1.4 million mobile phone customers are out of contract and paying for mobile phones they technically already own. On average, they’re paying £11 a month more than they would had they been switched to a comparable SIM-only deal.
All major mobile operators, with the exception of Three, have committed to automatically reducing bills for these customers once they’re out of their initial contract period.
In pledges to become active by next February, O2 and Virgin Mobile will cut monthly fees for these customers to the equivalent of a 30-day SIM-only deal. Vodafone and EE will automatically reduce prices three months after customers’ contract period has lapsed, although they haven’t said by how much. Tesco Mobile will reduce monthly bills to the equivalent of the best available airtime tariff.
In all cases customers’ charges will only be changed if the adjustment results in lower bills.
Lindsey Fussell, consumer group director at Ofcom, said: “Our research reveals a complex mobile market, where not everyone is getting a fair deal. So, we’re introducing a range of measures to increase fairness for mobile customers, while ensuring we don’t leave existing customers worse off.”
Customers will also be given a clearer breakdown of the costs in their bundled contract, including their handset and usage allowance. They will also be told what their bill would be if these items were purchased separately. The regulator said it will be introducing these rules as soon as possible but hasn’t a set a date for implementation.
Also proposed but not scheduled for implementation is a ban on ‘split’ contracts—ones with separate contracts for the handset and airtime—where the handset contract is longer than the one for airtime. These contracts make it difficult for customers to switch, forcing them to pay off their devices before they hop to another provider or tariff.
Consumer watchdog Citizens Advice, which has long campaigned against this loyalty penalty in the mobile market, welcomed the proposals.
“Most mobile phone providers have now realised the game is up,” said chief executive Gillian Guy.
However, it called on Three to join the rest of the market in reducing bills for loyal customers—and urged Ofcom or the government to take more assertive action if it fails to do so.
Three said it believed an automatic bill adjustment would backfire and discourage customers from switching.
“We do not believe Ofcom’s proposal will encourage engagement amongst consumers,” a spokesperson for the UK’s smallest mobile network operator said.
“Instead, it risks creating a stagnant market whereby consumers are not encouraged to shop around for the best deal at the end of their minimum term.”