Ofcom has set out a range of measures that are intended to help mobile consumers who are overpaying on their device contracts.
A consultation carried out by the regulator found that there are 1.4 million customers in the UK currently on ‘out-of-contract’ plans, who are still paying instalments towards their device despite having already paid it off.
On average, these customers are paying just under £11 per month more than they would on a comparable SIM-only deal, translating to about £182 million per year.
Ofcom has announced plans to make operators tell customers the cost of buying handsets and data separately “in the coming months”, and proposed a rule to ban operators from combining airtime and device bundle contracts where the handset contract is longer than 24 months.
Additionally, several operators and MVNOs have made pledges to reduce customers’ bills.
Vodafone and EE will reduce prices for customers out of contract for more than three months, and will confirm the level of the discount before the end of the year.
O2 and Virgin Mobile will reduce the monthly price for out-of-contract customers to the equivalent 30-day SIM-only deal.
Tesco Mobile will reduce monthly charges to the best available airtime tariff.
Three is the only major operator to refuse to apply any discount. All of the discounts will come into effect by February 2020.
In a statement, 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.”
Ofcom will support the measures by launching a campaign in autumn to highlight the benefits of switching provider.
Ofcom’s consumer group director Lindsey Fussell 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.”
uSwitch’s head of regulation Richard Neudegg added that Three “risks making headlines for all the wrong reasons” but that customers shouldn’t wait until February 2020 to look for a better deal.
He said: “Ofcom’s raft of proposals for greater transparency in the mobile industry ensures that customers should not suffer from the ‘cost of confusion’ in the future. And these measures announced today should go a long way to prevent legacy out-of-contract mobile customers from being out of pocket moving forward.
“However, customers who aren’t tied in to a contract today shouldn’t wait until February 2020, as significant savings can already be made right now by switching to a cheaper tariff or provider.”
