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Ofcom wants operators to switch customers to cheaper deals at end of contract

Ofcom has launched a formal consultation into proposals that would see mobile operators become more transparent about the airtime and handset component of their contracts and be required to notify customers when their minimum term has expired.

The regulator estimates that 1.5 million consumers are still paying for handsets they have already paid for over the minimum term of their contract, yet operators are under no obligation to inform them that they could save money by switching tariff.

Meanwhile, most contracts factor the cost of a handset and airtime into a single monthly fee. This means customers have no idea how much they are paying for their voice, text and data allowances and how much their device is costing them.

Ofcom contracts

Ofcom said it had been speaking to operators about introducing a solution to the problem that would not have required formal intervention but was unsatisfied by the lack of firm commitments from the industry.

Its proposals would require operators to break down the cost of the airtime and handset separately and for them to issue alerts at the end of the contract, and move them onto a comparable SIM-Only tariff or subtract the cost of the device from the bill.

“Mobile customers should get the best possible deal. We’re concerned that people are not told, or cannot tell, exactly what they are paying for,” said Lindsey Fussell, Ofcom Consumer Group Director.

“So we are extending our work on behalf of mobile customers to ensure that handset charges are clear and fair – not just when they enter a contract, but also when their minimum period is up.”

To appeal to consumers concerned about paying too much for their mobile contract, a number of operators offer ‘flexi’ tariffs that separate the cost of the handset from the airtime. Once the handset portion has been paid off, customers only pay for the airtime component. However research published by uSwitch suggested that these tariffs were still more expensive than a comparable SIM only deal.

“Ofcom’s calls for greater transparency from mobile providers are welcome,” said Ernest Doku, telecoms expert at uSwitch. “As the watchdog points out, millions of customers are currently paying more than they need to for their phone contracts, as they’ve already paid off the cost of the handset but are still forking out the same amount each month.

“There are a variety of different deals available to consumers in the market, so making things more transparent across all tariff types is vital, to make it easier to compare handset costs and what really is the best way to get a phone and airtime package.

 “There’s also a concern that some providers will use this push for greater transparency, in splitting out the cost of the handset and airtime, to advocate the new breed of ‘flexi’ tariffs. While these do separate out the cost of the handset and airtime, the benefits can come at a significant premium to customers who can pay as much as £19 million a month on airtime alone over the course of the deal.

“In reality, often the cheapest way to own the latest smartphones is to buy one outright, and pair it with one of the really competitive SIM-only deals currently available.”