Consumers risk missing out on £1 billion in savings promised by end-of-contract notifications for broadband and mobile services because notices will be issued too early, a study has claimed.
Regulator Ofcom plans to obligate communications providers to notify users when their minimum term ends, arguing that most people are unaware that prices are increased by an average of 62 per cent upon expiration.
Notifications would allow consumers to secure a new deal with their existing provider or move to a new one with more favourable terms. Such a move would be popular, with three quarters of broadband customers indicating they would act upon receiving such a notification.
End of contract notices
However, uSwitch believes that the 40-70 day window proposed by Ofcom is simply too early and that customers will expose themselves to early contract termination charges if they acted immediately. This would eliminate as much as £845 million of the £1 billion savings touted.
It wants the window to be 14-21 days before expiration, something that 77 per cent of people would agree with.
“Allowing companies to notify customers a whopping 70 days before their packages are due to end – as Ofcom is suggesting – risks letting providers get off scot-free as the information is not yet relevant and exit penalties still apply,” said Richard Neudegg, head of regulation at uSwitch.
“The other big factor is the actual content of the notices. Our research suggests that more consumers would be prompted to search for a better deal if more information is given about contract costs. It’s important to be really clear on what the longer term costs of sticking with an expired deal actually are and making clear there are other options.
“The regulator has a real chance to address these issues that have kept customers in the dark for far too long – but unless these notifications are optimally designed to encourage consumers to engage with the market, they will effectively maintain the status quo.”
To appeal to consumers concerned about paying too much for their mobile contract, a number of operators offer ‘flexi’ tariffs that separate the cost of the handset from the airtime. Once the handset portion has been paid off, customers only pay for the airtime component.
However, research published by uSwitch earlier this year suggested that these tariffs were still more expensive than a comparable SIM only deal.
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