Around two in three pay-monthly mobile customers are on a contract that ‘bundles’ the cost of a handset with the cost of using the phone, known as airtime.
Ofcom estimates that as many as 1.5 million consumers are still paying installments towards a handset that many have already paid off by the time they get to the end of their contract.
Buying a handset with a mobile contract is a popular way for people to receive a new phone, as it allows them to spread the cost over many months.
There are also concerns about transparency by mobile providers regarding the costs of the handset and the airtime when a mobile customer signs up for a bundled contract. Customers cannot always tell how much they are paying for the different parts of their deal.
Consumers should be able to identify the goods and services they are paying for.
Ofcom is setting out proposals for regulation to address how people are sold combined airtime and handset deals.
One option aims at achieving greater transparency. This would include requiring mobile firms to break down the cost of the different parts of the mobile package. That information should be provided clearly and transparently, at the point of sale, and again at the end of the minimum contract period.
A second option is to require providers automatically to introduce fairer tariffs at the end of the minimum contract period.
Under this option, mobile firms would move customers to a different ‘default’ deal when their minimum contract period ends. At this point, they would stop paying for their handset and instead, pay only for airtime.
Lindsey Fussell, Ofcom Consumer Group Director, said:
“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.
“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.”
Ofcom will consider the need for customers to make informed choices whilst avoiding unintended consequences – such as increased prices in other areas. Detailed proposals will follow consultation as part of Ofcom’s wider programme of work to ensure that mobile, landline and broadband customers get a fair deal.
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