Slow speeds, rising prices and router failures have long been common gripes of broadband users in the UK. Added to that, it seems likely that millions are being charged too much for their service.
A new push for customers to avoid unnecessary price increases was launched by the communications regulator last week when Ofcom proposed providers be compelled to tell people when they were at the end of their minimum contract period.
It is estimated that more than 10 million people are on deals where there is an automatic price increase at the end. And since many people don’t switch providers when they are out of contract, they are missing out on the savings.
This is an added frustration to the UK consumer – last year it was estimated that more than half of all users are getting a raw deal from their supplier, according to research from consumer group Which?
However, faced with the prospect of swapping routers, changing passwords and – if broadband is bundled with TV – possibly losing a backlog of favourite programmes, many are reticent to switch their broadband provider.
Why pay more?
Broadband contracts are typically offered on periods of 12, 18 or 24 months, during which users cannot leave or face a termination charge. At the end of this period, they are no longer tied to the existing deal and can leave and go to another provider, possibly for a better deal. Ofcom estimates that there are 10 million people who are on deals where there is an automatic price increase at the end. However, most providers do not remind people that their contracts are up, meaning that they roll on on a monthly basis with the possibility of an increased price or a change to the parts of the deal.
It is estimated that between 30% and 50% of the broadband market is “sleeping” – which means they are out of contract but have not switched – according to Andrew Peat from ctrlio, a website that compares tariffs according to use.
Customers who have a package with landline and broadband pay an average of 20% more when they are out of contract, showing that the best deals are often offered to new subscribers or those who haggle when their term ends, Ofcom says.
The switching problem
Many people simply are not aware of the status of their contract, according to a report from Ofcom, and do not know what will happen to their bill when the deal does end. Added to that, many do not know the options available to them. “Around one in 10 are unaware that they could switch to a better deal with their current provider once their contract ends,” said a consultation document on end-of-contract notifications.
The mantra from consumer affairs champions is to switch for better deals – whether that be mobile-phone contracts, bank accounts or insurance providers. However while switching can be relatively smooth in the energy sector, it is not the same with broadband, especially if you have signed up to a bundle which also includes TV.
There is a lot of “friction” in switching from TV and broadband, says Dan Howdle from the comparison site Cable.co.uk. It is not the case that moving from one provider can happen seamlessly in the background, he says, as people have routers, set-top boxes and a home network that may rely on the system that is in place.
“There is an emotional attachment to it. If you have a Sky box, your emotional attachment is not to that piece of plastic but the fact that you might have all of your favourite programmes on it for the last year. You might have paid for or bought movies on a service that is on that box. There is that stickiness,” he says.
Providers increasingly offer deals where services are bundled so that it is a more complex decision to switch, according to Peat. “They know that once they have got you with the TV package, you are unlikely to switch landline and broadband,” he says.
“A decision like that is more of a family decision than an individual decision so you have got to take into account what the kids are watching … and therefore the decision is put off in a way that it would not be put off for mobile because that is much more of a personal service. The added layer of TV services does create inertia in the market.”
But still there are savings
Ctrlio claims that consumers can see savings of between £180 and £200 a year by switching broadband providers. “Our view is that if you break those services down, there is still the opportunity to make savings because there are good deals on each individual part of those services. While there is convenience in having the complete package and you will get a discount versus buying all of your parts from one service provider in separate elements, there are better savings to be seen by choosing to switch at the right times with different providers for each,” says Peat.
Others are more sceptical that switching broadband provider, if within a package, will result in savings. Howdle says consumers will usually not benefit from splitting up the services and there are a number of instances where even being aware that switching will save money will not provide enough incentive to move.
“Unfortunately, due to bundling and the money that you save from bundling, that is never going to save you money. The way that the big providers provide all four services – broadband, TV, mobile, home phone – there is a discount at every level,” he said. “You are never going to be better off by separating out your services from different providers.”
Making the most of it
For those that don’t have that level of “stickiness” that holds them to their provider, switching can be lucrative, via incentives such as cashback or Amazon vouchers, Howdle says.
Choosing when to switch is also important, says Peat. Don’t feel that you have to buy a new deal on the day your current contract runs out, as there are certain times of the month when there are better deals available, usually at the end of a three-month quarter.
If providers feel that they are going to miss financial targets, they sometimes try to up the number of users of their services to disguise underperformance, says Peat.
“So you will see, at the end of quarters, broadband providers in particular offer very aggressive deals to be able to create a headline message to say, ‘OK maybe we did not hit our profit target but we overachieved on the sign-up of customers so this has been a good quarter for us’,” he says. For consumers to take advantage, however, they have to be aware of company timetables and time their switch accordingly, which may involve being on a rolling contract for a few months.
Switching to save
• Many consumers are not aware of when their broadband contract ends or what the new charges will be once it does. Find out the date and switch on an alert system on your computer’s calender to remind you when you are free to switch.
• Providers often reserve their best deals for new customers and to retain old customers. It is possible to negotiate a new deal at the end of an existing one by threatening to leave?
• Switching can be laborious as it often involves installing new equipment or changing other services if it is part of a bundled deal. However, there are savings to be made and also incentives, such as cashback deals or Amazon vouchers.
• It may sound like a lot of faff, but watching the financial calendars of the broadband companies can result in very good deals. As they near the end of a quarter, some providers will try and bulk up numbers by getting more customers on board with lucrative offers. So time your approach well.