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Helping consumers to get better deals in communications markets: mobile handsets

16 Medi 2019

Helping consumers to get better deals in communications markets: mobile handsets [ 150 kb]

Ofcom’s analysis of customer-level billing data provides a definitive picture of the loyalty penalty faced by consumers on bundled mobile phone contracts, revealing that loyal consumers are overpaying by £182 million each year. We therefore welcome the voluntary commitments from most mobile providers to introduce fairer prices for consumers who are out of contract. It is disappointing that Three have decided not to act. 

We are also concerned that the voluntary nature of the commitments could undermine Ofcom’s objectives. For instance, Three have refused to make a voluntary commitment. Some customers will continue to pay a loyalty penalty of between £1.5 million and £2.7 million each month. This is unacceptable. EE and Vodafone will also need to be clear that their discounts will cover the cost of the handset.

Ofcom should be clear about the options available should these voluntary commitments fall short, setting out:

  • If there are other interventions - aside from price controls - that could protect loyal consumers.

  • What regulatory powers government should introduce, if Ofcom does not have the appropriate powers to protect loyal customers. 

We were pleased to see the development of Ofcom’s draft fairness framework. This will be a useful tool for testing whether the voluntary commitments are delivering their intended aims. Ofcom should commit to testing the outcomes of the voluntary agreements against the framework by the end of March 2021. If the voluntary agreements fall short, Ofcom must take stronger action.

Our remaining recommendations are:

  • Three should immediately commit to reducing monthly bills for out-of-contract bundled customers 

  • EE and Vodafone customers should not have to pay 3 months of loyalty penalty before benefiting from the discount

  • Consumers who enter into a bundled contract via a third-party must also benefit from fairer default tariffs.