UK regulator Ofcom has confirmed plans for new limits on bundled mobile contracts, combining a phone and services. Operators will be required to provide more transparency to customers on the separate costs of the phone and mobile services. Ofcom also announced new voluntary agreements with operators to switch customers out of contract to more affordable service plans.
The new rules are part of a broader effort by Ofcom to increase fairness and transparency for telecom consumers. They add to the 'end of contract' notifications approved in May, whereby customers must be notified when they are approaching the end of a contract so they can consider whether their service is still suitable.
Ofcom said there are around 1.4 million out-of-contract customers who would save money if they switched to a cheaper SIM-only deal. These customers are collectively paying around GBP 182 million a year more than they would if they switched to a new deal, according to the regulator's research.
The proposed rules take into account the new EU telecoms code, which must be implemented by the end of next year. This means mobile customers entering into a bundled contract must be told the cost of buying the handset and airtime separately. Ofcom said it wants to introduce this for UK customers "as quickly as possible", and will set out its plans in the coming months.
For contracts already separated into services and handsets, Ofcom still sees a risk of consumers being unable to switch service provider due to ongoing installments on the device. Mobile customers are increasingly turning to such ‘split’ contracts – with separate contracts for the handset and airtime – so they can afford an expensive mobile phone in instalments, the regulator said. These type of contracts grew to 16 percent in 2018 from 4 percent of contracts in 2014. Ofcom proposed a new rule to ban mobile operators from linking split contracts where the handset contract is longer than 24 months.
Finally, Ofcom challenged industry to take action and reduce customer bills. It reached commitments from a number of the UK’s biggest mobile companies on this:
- Virgin Mobile will move its out-of-contract customers to the equivalent 30-day SIM-only deal.
- Tesco Mobile will reduce the monthly charges of out-of-contract customers who are overpaying to the best available airtime tariff.
- O2 will reduce the monthly price of its out-of-contract customers to the equivalent 30-day SIM-only deal. This will apply to its direct customers only, but O2 will discuss options for customers who take out O2 contracts with third-party retailers.
- Vodafone and EE will reduce their prices for customers out of contract for more than three months. Both companies will confirm the level of this discount before the end of the year. We expect their discount to take into account the level of savings available if customers switched to a comparable SIM-only tariff.
The operators are expected to implement the commitments by February 2020. Only 3 UK of the major operators did not agree to any measures. "As a result, these customers will continue to overpay and will not receive similar protections if they stay on their current deal," Ofcom said.