Mobile handset pricing: are customers getting a fair deal?

Ofcom today published its findings from an in-depth review into mobile handset pricing.

The review was motivated by the concern that many mobile phone customers, who pay for their mobile handset and airtime together in a bundled contract, continue to pay the same price after the end of their minimum contract period when they could save money by switching to a ‘SIM-only’ deal. This is an issue that has recently attracted considerable attention, including from Citizens Advice, the CMA and the Government.

Ofcom found that, whilst most out-of-contract customers on bundled contracts could save money by switching, a significant portion would actually be worse off (or unaffected) if they were moved onto the closest equivalent SIM-only contract. Further, it found that the number of customers affected is declining over time and expects this trend to continue as more customers choose options such as SIM-only deals or ‘split’ contracts (where providers split out the handset and airtime into separate contracts).

The report highlights initiatives that are already underway to help ensure customers get a fair deal, including the implementation of the new EU framework to protect consumers of communications services and new rules that Ofcom is introducing around end of contract notifications. We note also that a number of mobile operators have voluntarily agreed to apply discounts after the minimum contract period has ended.

In light of the review, Ofcom has decided not to mandate automatic switching to SIM-only plans at the end of the minimum contract period. It is, however, proposing to introduce a new rule, which limits the length of ‘split’ mobile contracts to 24-months, in order to make it easier for customers to switch.

Martin Duckworth, a Director at Frontier, noted ‘Ofcom’s report shows the need for regulators  to consider carefully detailed evidence on any apparent anomalies in pricing, particularly in a dynamic sector such as mobile communication, before imposing regulation which could lead to unintended consequences’ 

Frontier regularly advises firms and regulators on consumer issues across a number of sectors, including financial services as well as telecoms.

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