Ofcom says Consumers seeking better deals on communications services

UK consumers are using their phones and broadband more than ever before and are seeking better deals on their communications services, new Ofcom research reveals.

The annual Consumer Experience report looks at the overall experience of consumers in the communications market and shows that consumers are finding new ways to save money on their phone, broadband and pay TV services.

‘Bundles’ – An increasing number of consumers are choosing to take discounted ‘bundles’ with their providers. In 2008, 35 per cent of consumers took a discounted ‘bundle’ compared to 30 per cent in 2007.

The research also found that some consumers could make significant savings by taking some or all of their phone, pay TV and broadband services from the same provider. Typical communications baskets for some groups of consumers revealed possible savings of between £88 and £140* a year.

New international comparisons in the report suggest that for many types of consumer better telecoms deals are available in the UK than in the comparison countries in Europe and in the US.

SIM-only contracts: SIM-only contracts typically offer lower monthly fees and also give consumers greater flexibility to shop around for the best deal. They often only require a one-month contractual commitment: over 20 per cent of new mobile contracts in the first three quarters of 2009 were for one month only, whereas two years previously these contracts were not available.

Longer contracts: 24-month contracts are also becoming increasingly popular as consumers commit to longer periods in return for lower monthly fees and inclusive, or heavily discounted, handsets. In the third quarter of 2009, 42 per cent of new mobile contracts were for 24 months or longer, compared to only 5 per cent a year previously.

Switching slowing down: The research also shows that, despite consumers seeking better deals, there has been a large reduction in the proportion of those consumers who take bundles switching providers in last 12 months (from 24 to 13 per cent). More generally consumers are not switching as much in the communications sector as they are in other sectors such as energy and car insurance.

In order for consumers to fully benefit from a competitive market they need to be able to switch easily between providers.

Potential obstacles to switching: Ofcom aims to ensure that there are no unnecessary obstacles either in the switching process or in contractual terms in the way of consumers who choose to move between different companies and products. With an increasing move towards the sale of communications products and services by bundle, it is important that Ofcom considers regulations and processes that enable consumers to switch bundled products.

Ofcom has started a review of consumer switching to improve consumers’ experience of switching providers. The aim will be to deliver processes that ensure there are no undue barriers to consumers switching now or in the future. Ofcom plans to consult on next steps in 2010.

Currently Ofcom is considering the impact of automatically renewable contracts in residential communications markets. Under automatically renewable contracts, contract terms are automatically renewed unless the consumer explicitly tells their provider that they do not want this to happen. Early termination charges may be applicable if the consumer wants to leave during the minimum contract period. We plan to publish a document setting out our approach to automatically renewable contracts in 2010.

Consumer information: Consumer information plays a critical role in competitive markets. If consumers do not have access to information about the products and services available to them, they may make poor decisions and be reluctant to switch.

Overall, consumers are finding it easier to make cost comparisons across all communications services. Compared to 2008, the proportion of consumers who find it easy to compare costs in the bundled market has increased by 11 per cent.

Ofcom has so far accredited three price comparison companies – Simplify Digital (fixed-line, broadband and pay TV services), Broadband Choices (broadband) and BillMonitor (mobile). The Ofcom Price Accreditation Scheme ensures that consumers are provided with prices that are accurate, comprehensive, up to date and accessible.

In July 2009 Ofcom published the findings of research it carried out into broadband speeds. We intend to commission a further round of research and will also continue its programme of work on broadband speeds with the overall objective of ensuring that consumers are given the information they need to make informed purchasing decisions.

High levels of satisfaction and availability but concerns remain around ‘not spots’

The report shows that communications services are becoming more important for consumers with growing take-up of internet and mobile data services in particular. Mobile and broadband prices have continued to fall and have driven increases in take up. Competition has delivered better choice and value for money which in turn has generated high levels of satisfaction amongst consumers.

There is also wide availability of communications services across the UK but problems of not-spots for broadband and mobile services have been identified for both residential and business consumers.

The Consumer Experience evaluation and research reports can be found here: http://www.ofcom.org.uk/research/tce/.

Draft Annual Plan

To address some of the concerns raised in the Consumer Experience, Ofcom is proposing to undertake work on switching as well as making progress on broadband and mobile not-spots as priorities in its work programme for the twelve months from 1 April 2010 to 31 March 2011. The priorities and work plan for Ofcom are set out in a draft annual plan, also published today.

Ofcom has identified nine priority areas where it wants to make significant progress over the coming year.