Mobile users to get clearer breakdown of handset costs
Mobile phone customers will be given clearer information about how much of their monthly payment goes towards paying off their handset, as part of a package of new measures announced today by the telecoms regulator aimed at protecting those who are overpaying.
Ofcom has unveiled three initiatives to help tackle unfair mobile phone pricing:
- Mobile contracts will give a clearer breakdown of costs. Customers choosing a bundled contract – which includes a handset and a usage allowance – will be told what the cost would be if both parts were bought separately. Ofcom says it wants to introduce these new rules "as quickly as possible" but hasn't set a firm date.
- Ofcom's also proposing a ban on firms linking 'split' contracts where the handset contract is longer than 24 months. A split contract is where consumers have separate contracts for their handset and airtime – Ofcom wants to stop longer split contracts being linked because it makes it harder for customers to switch providers if they have to pay off their handset before they can switch. This is just a proposal though and there's no set implementation date.
- Five mobile firms have also agreed to cut costs for out-of-contract customers from February 2020. These companies, including EE, O2 and Vodafone, have made various specific commitments to reduce bills for customers once their minimum contract term is up – see more details below.
How are mobile firms cutting bills for out-of-contract customers?
Ofcom says mobile operators have made the following specific commitments from February 2020 – though remember, despite the discounts they're offering you can still likely save much more by ditching and switching as soon as your minimum contract term's up:
- EE and Vodafone will reduce prices for customers who are out of contract for more than three months. Both companies will confirm before the end of the year how much this discount will be. Ofcom says it expects their discounts to take into account the level of savings available if customers switched to a comparable Sim-only tariff.
- O2 will reduce the monthly price for its out-of-contract customers to the equivalent 30-day Sim-only deal. This will apply only to customers who signed up with O2 directly, though O2 says it will discuss options for customers who take out O2 contracts with third-party retailers.
- Tesco Mobile will reduce monthly charges for out-of-contract customers who are overpaying to the best available airtime tariff.
- Virgin Mobile will move its out-of-contract customers to the equivalent 30-day Sim-only deal.
Three is the only 'big four' firm that has refused to apply any discount to its out-of-contract customers. As a result, Ofcom has warned Three customers will likely continue to overpay.
A Three spokesperson said: "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."
What does Ofcom say?
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."