Ofcom say Millions pay the penalty for broadband ‘loyalty’
NEARLY half of households are paying a so-called “loyalty penalty” for their broadband, analysis by Ofcom reveals
Almost nine million people, or 40 per cent of customers, are overpaying for their internet because they are allowing expired contracts to renew, rather than opting for a new one, the regulator found.
The average price paid by out-of-contract customers for broadband is £8 to £9 a month higher than for new customers with the same company, totalling around £100 a year – a difference known as the “loyalty penalty”.
Ofcom’s research shows that out-of-contract customers are also often paying more for slower internet speeds.
The worst offenders are BT and TalkTalk; out-of-contract customers of these companies pay £12.70 and £13.70 more than new ones. Between a third and a quarter of their customers are on expired contracts. The provider with the most customers overpaying each month is Virgin Media; 56 per cent of its customers are out-of-contract and paying a loyalty penalty of between £97.20 and £144 a year.
A Which? study this year found that four in 10 customers have been with their television and broadband provider for more than 10 years. The loyalty penalty paid by broadband users who fail to switch providers over that decade was £6,000 on average.
Experts have raised concerns about the impact of these higher costs for failing to switch provider on vulnerable consumers such as the elderly, those with a physical or mental illness, and people suffering from bereavement.
Of the 8.8 million broadband customers who are out of contract, Ofcom identified 1.5 million as “vulnerable”. This means that 43 per cent of all vulnerable customers are overpaying on their bills – higher than the average.
However, loyal customers are set to receive some reprieve after Ofcom announced yesterday new measures to make broadband prices fairer.
From February 2020, broadband customers will be told when their contract is nearing its end and informed of the best deals available.
Lindsey Fussell of Ofcom said: “Broadband customers who are out of contract can make big savings – around £100 a year on average – by picking up the phone to their current provider and signing up to a better deal.”
She added that, following the changes, all customers will be made aware of the best tariff on offer.
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It is probably worth checking the contract cancellation terms and conditions as, for example, I believe some contracts are deemed to be eligible for cancellation for a limited period should the vendor increase the monthly charges.