UK consumers getting more for less in telecoms, but prices are going up

Consumers in the UK are paying less for their communications services than they were five years ago, even though data usage is increasing, according to Ofcom’s latest Pricing Trends report.

However, the regulator also noted that a number of big names in the industry have hiked prices in recent months and warned telcos that they must “do more” to help low-income users.

Average mobile prices were 22% lower last year than in 2015, while minutes of usage increased by 32% and data usage was up by 369%, according to Ofcom. The average cost of a basket of mobile services, based on average usage and excluding the handset, was £11 per month in 2020, the regulator added, down by 10% on 2019 despite growing usage.

Similarly, average new customer prices for superfast broadband and landline bundles fell by almost 20% last year compared with 2015, but data usage grew by 342% and download speeds rose by 178%.

Telecoms service prices in the UK also compare favourably with other markets analysed by Ofcom. The country comes out on top in the mobile market, offering cheaper services than France, Germany, Italy, Spain and the US. The UK also ranked second and third respectively for average fixed-line and fixed broadband prices, and came second for the price of triple-play bundles. Overall, the UK comes in third of the six, behind perennial leader France, which continues to offer the lowest telecoms prices, and Italy.

Despite those positive figures – for consumers, at least, if not so much for telcos – the regulator sounded a number of notes of caution for communications services customers in the UK.

On the mobile side, it advised consumers that they are better off taking SIM-only deals and buying a handset separately, rather than paying for the phone as part of an operator contract.

We estimate the difference in price is equivalent to customers being charged an APR of up to 23% for their handset ‘loan,’ Ofcom said. “This can be higher if customers do not move to a SIM-only deal when their contract ends.”

That probably doesn’t come as a huge surprise to UK consumers, nor does the fact that high-usage customers buying bundles are getting better value for money. People buying bundled services including superfast broadband or mobile products with large amounts of data “tend to have access to a wide range of keenly priced tariffs,” Ofcom said.

But the flip side of that is that some lower-use customers are less well served. For example, some standard broadband users who do not keep an eye on the market could find they are paying more than superfast users for a slower service. Meanwhile, in the mobile market, a paucity of sub-1 GB data plans means these tend to be relatively expensive, again hitting low usage customers, while low-end mobile plans with no bundled data actually rose last year.

“In a complex marketplace, shopping around brings considerable savings,” Ofcom advised.

This is good advice, particularly given that a number of big telco names have increased prices in recent months. Ofcom listed BT, its mobile arm EE, Three and Vodafone as examples of providers that have introduced above-inflation price rises in the first half of 2021.

It also noted that pay-TV prices have risen over the past year, adding that consumers are more on the ball when it comes to market engagement in broadband and mobile services than they are with pay TV; churn in the pay TV sector was just 7% over 12 months, compared with 15% in mobile, for example. Again, the advice is to engage with the market.

For some customer segments though, engagement only goes so far. The headline finding of Ofcom’s report – or at least the point it chose to lead with – is that despite generally falling prices and the introduction of some low-cost tariffs for low-income users, telcos need to do more to help those struggling to afford communications services.

The regulator claims around 2 million UK households find paying for Internet connectivity a struggle. This year BT, Community Fibre, Hyperoptic, KCOM, Virgin Media and VOXI have all introduced low-cost tariffs – ranging from £10 to £20 per month – for people on benefits, or improved their existing offers. However, take-up of those tariffs has been low, with only 40,000 households, or 0.15% of UK homes, having signed up; that equates to just 1% of those in receipt of out-of-work benefits.

“Telecoms firms need to do more,” Ofcom declared, without really specifying whether it is looking for more low-cost services or more marketing and education, or indeed something else. It hinted that it will force the issue if it has to though.

“If the telecoms industry does not take sufficient action to address our concerns, we think there would be a strong case for exploring whether mandatory social tariffs would be necessary to fill the gaps in support, alongside other potential options,” Ofcom said.

Well, that’s cleared things up.