Ofcom consulting on helping consumers get a better deal: what do service providers need to know?

Written on 28 Jan 2019

What has happened?

One of Ofcom’s duties, as the regulator of the UK communications services, is to further the interests of consumers by preventing consumer harm. Ofcom has launched a series of consultations focusing on helping consumers to get a better deal.

We have set out a summary below of the key consultations that communications service providers should be aware of and the key dates to look out for in 2019.

Helping consumers get better deals

Ofcom opened a consultation on 14 December 2018 to consider proposals relating to: end-of-contract notifications; the provision of annual best-tariff notifications; and pricing practices in the fixed broadband market.

  • End-of-contract notifications. This is the second consultation on end-of-contract notifications, following a previous consultation that October 2018. Ofcom has now published its final proposals and wants communications service providers to proactively alert customers when they are nearing the end of the fixed-term contract and provide them with certain pricing information on the best tariffs and keep records for at least 12 months to enable Ofcom to monitor compliance.
  • Pricing information on best tariffs. This issue is connected to the end-of-contract notifications. Ofcom is proposing that when customers near the end of their fixed-term contract, and if they stay ‘out of contract’ annually thereafter, communications service providers provide prescribed information to their customers to help them make informed choices about the service. To enable Ofcom to monitor compliance, services providers will be required to keep records for at least 12 months.
  • Review of fixed broadband pricing. Ofcom is undertaking a review of broadband pricing across the industry with a particular focus on vulnerable customers. If Ofcom determines that there are pricing practices that cause harm to vulnerable customers, additional measures may be implemented.

The consultation closes on 1 February 2019 and a response is expected from Ofcom by April 2019.

Mobile airtime and handset bundling

Ofcom has also consulted on impact of mobile airtime contracts with handsets where the mobile service provider continues to charge the same monthly fee after the expiry of the initial contract period and once the cost of the handset has been recovered. You can read more about the issue in this article.

When:

Consultation Timeframe
 End of contract notifications  Consultation statement to be published May 2019, followed by six month implementation period
 Pricing information on best tariffs  Consultation statement to be published May 2019, followed by six month implementation period
 Review of broadband pricing  Consultation response expected by May 2019
 Mobile airtime and handset bundling  Findings to be published during summer 2019; final statement to be published in early 2020.

Impact

There is a trend towards ensuring that consumers are provided with more information to make informed choices about their communications services without having to search through multiple web pages, and to ensure that they can understand the difference between different offers. This shift towards proactively providing information on best tariffs is following the energy market, which has been required to provide similar information for a number of years. We may also see a shift to service providers having to proactively reduce contract pricing to reflect the best deal the consumer could be on – or at least changing from a handset plus airtime contract to SIM-only.

Coupled with the requirement to proactively notify customers if they are out of contract and can leave without incurring early termination fees, communications service providers may see a greater churn in customers moving to alternative services which they perceive to offer them a better deal. In an already competitive market, this may – as Ofcom hope – drive better deals for customers who stay with their existing provider rather than switch. This will inevitably have an impact on the revenues of communications service providers.

To implement these end-of-contract notifications and best tariff pricing information will require significant developments in the internal processes of service providers. This can take time to implement, which may be a challenge given that the consultation proposes an implementation period of just six months.

Impacted communication service providers should therefore be reviewing what changes are needed to their existing systems as soon as possible.