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The hidden cost of your mobile contract

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Our latest research has found that mobile customers are collectively losing out on billions of pounds a year by being on the wrong contract for their usage. When was the last time you switched mobile contract?

As I’m sure most people who have recently gone through it will agree, changing your mobile contract can be a pain. And with two year minimum contracts now standard, there’s even more pressure to make the right decision.

This shows in the number of people actually switching – nearly half of people on a mobile contract have never switched. Of those that have switched, four in 10 switched over four years ago.

That means there are hell of a lot of people on contracts that aren’t right for them. In fact, we’ve worked out that mobile users are collectively losing out on £5.4bn a year, either by paying for texts, minutes and data they don’t use or paying extra charges because their phone package is too small. That’s £159 per person, or enough to subscribe to Netflix for more than two years!

Switching mobile phone contracts

Even when people know they’re on the wrong deal, they’re reluctant to switch due to the many barriers in the way. For example, mobile companies don’t always notify you when your contract’s about to end, they require 30 days’ notice if you want to switch and charge you to unlock handsets you’ve already paid for.

Then there are all the different tariffs available. Do I want to pay more for the phone upfront, or pay nothing and pay a higher monthly tariff? And exactly how much are you charging me for that new iPhone 6 compared to the cost of my minutes, text and data? It’s all just so confusing.

Part of the problem is that we’re never really comparing all the deals. Most of us are offered a deal by our existing provider in return for our loyalty, but there’s no real way of knowing whether someone else is being offered an even better deal somewhere else. And the system is set up so that you have to do all the leg work; cancel your old contract, get your handset unlocked, get your PAC, time the new contract so you don’t lose service…

This is why we want the system to change – we want Ofcom to introduce a system where the provider you’re moving to is responsible for the switch. This is similar to how it works with banks and energy companies.

The mobile industry needs to change

We also want mobile companies to make voluntary changes. They should:

  • Notify you a month before your contract ends so you have time to look for better deals.
  • Give you your average usage stats so you know whether the deal you’ve spotted is right for you.
  • Show the monthly cost of the handset separately from the service charge.
  • And automatically unlock handsets for free.

These are steps mobile companies need to take if they’re going to restore consumer trust, which is currently lower than the banks! It’s a wake up call the industry cannot afford to ignore. Nor can they ignore your support for our campaign.

Comments
Member

We need an end to the system where consumers have no reasonable option but to buy their mobile phone usage in monthly allowances or bundles of minutes, texts and data. Imagine if we had to buy electricity and gas in this way – guessing how much you will consume in a month and then wasting any units that you don’t use by the end of the month. Consumers wouldn’t tolerate it with energy, so why do we tolerate this practice with mobile phone services?

If you don’t buy your mobile usage in allowances or bundles, then the per-minute, per-text or per-megabyte charges can be prohibitively high. The only network that offers reasonable incremental pricing is Three – 3p/min, 2p/text and 1p/MB. Not even Giffgaff, a Which best buy, comes close to this – charging a whopping 20p/MB (£200/GB) after the first 20MB each day, yet it offers a monthly bundle where a gigabyte costs just £7.50.

The only purpose of monthly allowances and bundles is to charge the consumer in full for usage that isn’t fully consumed and to charge prohibitively high rates for any usage over the monthly allowance or bundle. This practice favours the networks without giving any advantages to consumers. It’s fine to offer volume discounts, e.g. reduce the incremental price per minute, text or megabyte after certain usage level each month, but forcing consumers to pay for usage that they don’t actually consume is absurd. Again, I ask why we wouldn’t tolerate this practice for energy but we do tolerate it for mobile phone service. This needs to change.

Member

Looking at the thumbs up/down signs, I am left wondering who would not support your comments NFH, and why. I agree with you wholeheartedly and I cannot begin to understand why masses of people have fallen for these contracts. Yes, PAYG is expensive but the high price sort of moderates use which puts time back in your day [unless you think you really can do two things well at the same time].

Member

PAYG is expensive only to force people into buying bundles. If the networks can offer postpaid incremental tariffs as “corporate tariffs” (see below) and Three can do so at reasonable prices on PAYG, then they equally could offer them to retail consumers.

Member

Over the years I have been fed-up with mobile service providers moving the goal posts. Here is one example. Not so long ago, credit on a Three mobile phone expired after 30 days. I discovered this when I tried to use the spare mobile I keep in the car, which had been unused apart from a test call. I got a new Three SIM after Christmas now that they have removed the expiry clause, and was pleasantly surprised to find I still had £9.97 credit after a test call.

Member

NFH, PAYG is only expensive if you use it a lot. I don’t. I make necessary phones calls, occasional texts, and that is all I need. I very occasionally top up my £30 phone with £10 to cover 3 months or so. Between us Mrs R and I spend less than £60 a year on mobiles. We have a landline at home, though, and use our PC and iPad for internet access.

I really don’t know why people need to make such huge use of mobiles and what they did before they were available. Not a criticism, just a personal point of view 🙂

Member

Malcolm – Until less than a year ago, I had a PAYG mobile and did not use it often. The main reason I moved from PAYG for my main phone was the high cost of daytime calls to mobiles from my landline. My landline tariff covered evening and weekend calls to mobiles and some of the people I have to contact during working hours only have mobiles.

Hopefully the cost of calling a mobile from a landline will plummet soon.

Member

Our use of mobile phones is even more economical than Malcolm’s I should think. Apart from the other reasons, we also regard the mobile phone as an inferior instrument for a proper conversation. When we are out we have no desire for people to call us so we only use them for making very brief calls or texts [e.g. to have a taxi meet us at the station].

Member

Malcolm, you say “PAYG is only expensive if you use it a lot“. This is precisely my point. Why should heavy users be forced to buy bundles or allowances in order to pay a reasonable price for their consumption? It’s absurd that one has to predict one’s precise consumption in advance and then pick a bundle or allowance just above this amount. We wouldn’t tolerate this forced prediction nonsense with electricity or gas, so why do we tolerate it with mobile phone service?

If this happened in the energy sector, Ofgem would clamp down on it quickly, but when it happens in the telecoms sector, Ofcom allows it to become the norm.