As businesses continue to be run from back bedrooms and kitchen tables, and restrictions to life mean that home entertainment can be a vital escape, the prospect of a broadband connection going down can be the stuff of nightmares.
But although the pandemic has confirmed just how important it is to everyday life, that’s no reason to pay over the odds for the service. A huge proportion of households – some 8.7 million customers – are doing just that, simply because they have not switched to the best options on the market.
Last week, regulator Ofcom, in its latest bid to get better value, announced fresh agreements with providers that will result in customers being informed of better deals when their contracts come to an end.
So how can you ensure you are on the best deal available?
Typically, when people sign up to a contract, they get an attractive rate on the basis that they are new customers. When the initial period ends, they are moved onto a higher rate automatically – unless they switch to a better deal or another supplier with more attractive prices.
Just two years ago, over 10 million consumers were thought to have been “out of contract” and paying more than they needed to. Many did not know there were better deals to be had, or were put off by the thought of swapping equipment to move to another provider.
A push by Ofcom over the last two years is bearing fruit. Customers are now told when their contract is coming to an end, and what they could save by switching to another rate with the same provider. Most of the major providers do offer the same rates to existing customers that they do to new ones.
Last September, BT, TalkTalk and Virgin Media said they would reduce prices automatically to vulnerable people – those who may have a mental or physical health issue, or have lost their job – that go out of contract. It was announced last week that EE, Plusnet and Sky would also do the same.
“Overall, people are paying too much and this should, hopefully, mean fewer people will be doing so,” says Natalie Hitchins of Which?
However, despite those changes, some 8.7 million broadband customers are out of contract - 40% of the market according to Ofcom. They are paying £4.70 more a month – that’s £56 a year – compared to the average customer on a deal with the same provider. But if they were to switch to another provider with the best competitive deal, they could be saving an average £159 a year, according to comparison site uSwitch.
Why not switch?
There is usually little benefit in staying with one provider at the end of your contract when it comes to broadband, the “loyalty penalty” being that you end up paying more. Contracts usually run for 18 months, although there are 12-month and 24-month deals in some cases, and at the end of the period you can either move, or are deemed to be “sleeping” out of contract. If you stay without a contract, there is usually a default price rise, which means you are no longer on the most competitive rate.
Typically, switching between providers is much less frequent than with energy or insurance bills. Central to this is the “stickiness” of broadband accounts which are frequently tied up with TV and home-phone deals. Changing one would mean having to alter the others, leading to more work. Many also view the prospect of having to change equipment as a hassle they could do without.
“Broadband providers obviously want to do things to encourage that stickiness. One of the things that came up recently was the fact that most give you an email address,” says Dan Howdle from the comparison site Cable.co.uk. “About 50% of people use it as their main email address but then, of course, if you switch to another provider you lose that.”
But it may be easier than you think...
Before the idea of hopping from one provider to another became common, many customers steered clear of switching between energy suppliers, says Hitchins. But attitudes have changed and people are now much more used to the idea. In the same way, switching broadband does not have to lead to a confrontation with an obstructive provider who causes you to feel uncomfortable – a lot is possible online.
However, while customers will now be told what deals their current provider will give them, if they want to know what else is on the market, they will have to do their own research. It is here where the real savings will happen according to uSwitch’s Richard Neudegg.
“When you look at the market more broadly, people can save even more money if they are prepared to switch. Some consumers are nervous about this because we have seen how important broadband has been during lockdown,” he says. “But more often than not it is easier than people think – there might be a new box to plug in but that tends to be relatively straightforward and most of the time it is managed by the new provider.”
How to do it
Switching provider does not just have to be about saving money, you can also ensure you are getting the best speed available in your area. Using a postcode checker will let you see what packages and at what speed.
Howdle says it is worth looking out for deals which are available for a limited time, used to entice people in, often with the offer of award cards or vouchers.
Watching the financial calendars of providers may also be a good way to get a good deal. When they are nearing the end of a quarter, they try and get more customers on board with lucrative offers.
The new measures by Ofcom also mean that the broadband market is now more transparent, says Hitchins.
Ofcom says it will be monitoring the new changes and report back next year.
“We expect to see a significant reduction in the proportion of those who are out of contract both through the implementation of end-of-contract and annual best-tariff notifications, as well as the pro-active engagement the providers have committed to with their vulnerable customers,” says a report from Ofcom.
Where you live and what it costs
Broadband costs vary hugely and depend on the speed of the connection and whether its is bundled with other services, while the choice of provider will depend on where you live. Research from Ofgem shows that over six in every 10 Virgin Media customers are out of contract – and paying £4.30 a month more than the average customer who is still in contract. Four out of every five Sky and Plusnet customers are out of contract while BT (30%), TalkTalk (25%) and EE (24%) have lower figures. However, EE customers who are out of contract are paying the most – £7.90 a month more – compared to the average bill for other customers.