Ofcom 'fair deal' action: UK mobile networks agree to slash contract charges when lock-in ends – except Three
Hutchison's underdog won't, even if handset paid off
Telecoms regulator Ofcom is pushing mobile companies to make clearer to customers when their bundled and split contracts end, as many are left on high tariffs even when they've paid off their handsets.
Inertia and ignorance are costing punters £182m a year more than if they switched contracts on time, according to the regulator.
Lindsey Fussell, Ofcom's consumer group director, 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.
"All the major mobile companies – except Three – will also be reducing bills for millions of customers who are past their initial contract period."
Ofcom previously wanted subscribers switched automatically to a SIM-only deal when their contract ends, but found this would end up costing some people more.
Many people pick a monthly tariff, which includes paying for a new handset over a year or two. But many fail to switch contracts once they own the phone.
Ofcom reckons about 2 million Brits are out of contract but still paying the fee originally agreed – in effect continuing to hire a handset they already own. Of those, 1.4 million would be better off on another deal – on average, overpaying by £11 a month.
European Union rules due at the end of next year will force providers to show the costs of airtime and handset costs separately. Ofcom wants to push this out as soon as possible. It also wants to end long split contracts of more than 24 months.
The regulator is urging mobile operators to tell customers when their contract is up and offer them the best deal.
As a result of this consultation, which closes in September, some networks have already made changes.
Virgin Mobile will move out-of-contract subscribers to an equivalent to a 30-day SIM-only deal.
Tesco Mobile will cut fees to the best available deal.
O2 will put its own customers to the equivalent of a 30-day SIM-only deal and "discuss options" for users with O2 contracts taken out via third-party retailers like Carphone Warehouse.
Vodafone and EE will cut prices for punters out of contract for more than three months. Ofcom said it was disappointed at the companies' lack of transparency and hopes the discount will be similar to savings from switching to SIM-only.
The only uncooperative operator is Three, which told The Reg: "We want consumers to engage with the mobile market, switching providers that don't work for them and finding the best deals to suit their needs. That's why we have worked closely with Ofcom to encourage consumer engagement, particularly around auto-switch reforms, end of contract notifications and best tariff advice.
"We do not believe Ofcom's proposal will encourage engagement amongst consumers. 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."
Sky Mobile and GiffGaff do not, and have never, offered bundled deals so were excluded from the research. ®