Is My Bill Fair, a price check website, compared the bills of more than 100,000 broadband customers over the past six months with the average rates suppliers offered to newcomers. The research found that existing customers of major broadband ISPs – including EE, Plusnet, BT, TalkTalk, Virgin Media and Sky Broadband – are being “overcharged” between £91.20 and up to £235.56 per year as a result of the so-called “loyalty penalty.” telecom overcharged
BT broadband customers fared the worst, with nine in ten paying £236 a year more than they should.
The use of the word “overcharge” is perhaps a bit misleading since we’re NOT talking about billing mistakes. Instead this largely reflects the difference between initial discounts and post-contract pricing. The practice of offering discounts on new subscriptions exists across nearly all service sectors and is by no means unique to broadband.
In practice what this means is that the biggest ISPs tend to offer a reduced price for the first 12-24 months of a contract term in order to attract new customers, but after this the price will inevitably rise. Such discounts and special offers are fairly normal for any aggressively competitive service market, although not all ISPs are clear enough about how much you’ll pay post-contract.
|ISP||Average loyalty penalty (monthly)||Percentage of customers “overcharged”|
Ofcom’s measures for overcharged users telecom overcharged
Ofcom has already moved to tackle this problem by introducing a new end-of-contract notification system from 15th February 2019 and they’ve also encouraged the biggest providers to support their recent Fairness for Customers commitment, as well as related proposals for a new Fairness Framework.
On top of that the regulator has this week also extracted some related pricing commitments from the biggest broadband providers, although a few of the key changes won’t start until March or mid-2020. The focus of this is also largely upon vulnerable consumers who may not switch and can remain stuck on expensive legacy packages for years.