Mobile Telecommunications Market: Contracts
Nigel Huddleston (Mid Worcestershire) (Con)
We have a very intimate relationship with them; many of us sleep next to them; they are often the first thing we see in the morning and the last thing we see at night before we go to bed; we rarely let them out of our sight, and when we do we panic for a second; if we accidentally leave them at home, we will invariably go back for them; we get nervous when anybody else touches them. I am talking, of course, about our mobile phones, because those devices are completely embedded in our day-to-day lives. We use them to communicate with loved ones, to conduct business, to buy and sell things, and to entertain, educate and inform. We love our mobile phones, but we do not always love the mobile phone operators or the prices that come with them.
About 95% of UK adults have a mobile phone, and we have one of the highest smartphone adoption rates in the world at 75%. According to consumer group, Which?, just 35% of consumers trust their mobile phone operators, and of the top 100 brands for customer service in the UK, only one of those operators is in the top 50—Three comes in at No. 42, and the other companies came in at Nos. 67, 95 and 96. As a category, that is even below the banks. Also according to Which?, more than 70% of consumers are on the wrong contract for their needs, and that is costing the British public up to £5.4 billion a year more than necessary. In other words, the average UK household could save around £160 a year by choosing a more suitable tariff.
We rarely change our mobile phone company or our tariffs. More than half the UK population have never changed their carrier, and only 6% change carriers or switch each year—that figure is down from 9% a couple of years ago. It is therefore hard to square the general level of dissatisfaction with mobile phone operators and the phenomenon of paying more than we need to, with that incredibly low switching level.
Anyone who has ever tried to switch from one mobile phone operator to another knows that it is a difficult task. The current process requires consumers to almost simultaneously contact their existing provider to terminate their current contract, while getting their desired provider to activate their new one. That is time-consuming, and it often involves conversations about a porting authorisation code—the PAC—or unlocking devices. That is so confusing that many people simply give up and do not bother. No wonder that switching is at that miserably low level of just 6%.
To work out whether it may be worth switching, people need to know what else is on offer, although that is not always easy. Only a third of price comparison sites contain the best available deals. When someone calls their current provider and informs them that they are thinking of switching, they are often put through to something called a retention department where—as if by magic—all of a sudden a better deal appears. That prompts the question of why, if a transparently better offer was available, it had not already been communicated to the consumer.
Nusrat Ghani (Wealden) (Con)
Does my hon. Friend agree that transparency is particularly important for the elderly? People are often encouraged to get a mobile phone by their children or grandchildren in case of an emergency, but they are not always technologically savvy enough to know what kind of tariff or package is right for them. They are at high risk of being hugely over-charged when their contract comes to an end, particularly as they get older.
Nigel Huddleston
My hon. Friend makes an important point. Research by Which?, and others, has shown that as we go through the age brackets, the number of people switching goes down. Many more people in the elderly age groups are on the wrong contract, and many more do not really know what the process of switching involves. I know that Age UK campaigns on that issue.
What can be done about this issue? The good news is that some progress has already been made. In July, Ofcom launched a consultation on consumer switching, seeking views on a range of mobile switching options. I await the results with interest. The Government have a strong record on consumer affairs, and the Department for Business, Innovation and Skills recently set out six specific proposals, or principles, on switching intended to cover a range of industries including not only the mobile sector but broadband, banking and energy. In these, the Government recognised that consumers should be able to switch quickly, at an agreed date, for free, with access to data in a format that can be easily understood and that the switching process should be gainer-led, eliminating the need to contact both losing and gaining operators. I believe we are unique in Europe in still having a loser-led system for switching.
Things are moving in the right direction. I am aware that some operators themselves are keen on the gainer-led system, including Three. In many ways, I feel I am pushing at an open door on switching. I am confident about progress on switching, but further work is needed on contract transparency and tariffs.
Jim Shannon (Strangford) (DUP)
I liked the hon. Gentleman’s introduction. I remember my first mobile phone: it was the size of a red brick and I used to carry it everywhere. It filled my hand and two pockets. Mobile phones are a part of life, more so today than ever. Does the hon. Gentleman agree that one of the advantages consumers have is that competition in the market has pushed the price down? Companies want to hold on to their customers as if with glue and they will not let them go. Companies are very reluctant to let go of businesses in particular, because they see their commercial value. Does he think more needs to be done for companies involved in industry and commerce?
Nigel Huddleston
Indeed. The hon. Gentleman makes a very important point. The debate is focused on the consumer, but the same principles absolutely apply to business: the same discussions and concerns about the customer service of some operators apply equally to business.
When I received my electricity bill the other day, I was very pleased to see a note at the bottom of the bill that said:
“Good news—you’re already on our cheapest overall tariff. We’ll let you know once a year if this changes.”
Would it not be great if there was something similar in the mobile space? Instead, we are paying £5.4 billion more than we have to. Even if that figure is exaggerated and even if it is not correct or just a fraction of that, we are still talking about a significant sum. There are three key reasons why we are significantly overpaying for our mobile services. First, some consumers are paying for services they never use, with 58% generally going under their minutes allocated and 63% under on their text limit.
Mr Ranil Jayawardena (North East Hampshire) (Con)
I congratulate my hon. Friend on securing the debate. On consumers paying for services they do not use, does he agree that it is even worse if consumers are paying for a service they cannot use? They enter into a contract in good faith, but are then trapped into a service that does not provide mobile signal at home, on the commute into work, or at work.
Nigel Huddleston
I completely agree. I am focusing on the contract side of things today, but it is absolutely the case that when consumers consider moving operators they look at maps of coverage and whether they can get a 3G or 4G service. That is one of the points to consider. Often they are then persuaded that an alternative operator will fulfil their needs, only to find out when they open the phone at home that that is not the case. There are no repercussions to that and no compensation. That is a major concern that needs to be addressed.
Nusrat Ghani
My hon. Friend makes an important point about the design of mobile phone plans. Does he support encouraging mobile operators to have flexible plans that allow people to pay for a combination of data, calls and texts that reflects their needs, instead of their having to pay more for a plan with unnecessary extra minutes, just because they want more data?
Nigel Huddleston
My hon. Friend makes an excellent point that touches on the whole purpose of this discussion. Many people are either on plans with services they never use, in which case more flexibility would be appreciated, or paying a penal rate for services they did not anticipate using but ended up using. That is costing consumers hundreds of millions of pounds a year—I think that £885 million a year is spent on out-of-tariff charges, for example.
Gavin Robinson (Belfast East) (DUP)
I am on the Labour Benches because I want to give the impression that Labour Members are also interested in this important consumer issue. In fact, I should be sitting beside my hon. Friend the Member for Strangford (Jim Shannon)—
Mr Deputy Speaker (Mr Lindsay Hoyle)
Order. The hon. Gentleman is meant to be making a short intervention, not trying to score political points, in what is actually an Adjournment debate. I am sure that hon. Members want to hear from the hon. Member for Mid Worcestershire (Nigel Huddleston), so I want a short intervention.
Gavin Robinson
It was only a quip, Mr Deputy Speaker.
I have a sim card for an iPad that I do not use, but I have discovered that for the last two years the provider has been removing £10.21 from my bank account every month. When I phoned and asked to cancel the charge, I was told I needed the serial number on the sim card, which I no longer had. Is that not something that should be looked at—taking finance for a service that is unavailable?
Nigel Huddleston
I know that many Labour colleagues are also very concerned about this issue, but the hon. Gentleman makes a good point about the failure of customer service and the perception that providers can dip into our accounts, regardless of whether the service is being delivered or is adequate to an individual’s needs. We are building a picture here of the customer service challenges among the mobile operators.
There is another point of which many Members will be aware from their constituency correspondence. It concerns a situation where a consumer signs up to a contract, perhaps with a new device, that is then bundled with a service charge. Go forward 24 months, to when the contract expires, and instead of being over, the contract is rolled forward, and we get this bizarre situation where the consumer continues to pay for the device as well as the service. This can be a considerable hit on their finances. Some 46% of mobile users do not change their tariff as soon as their initial bundle ends and so pay an extra £92 effectively for handsets they have already paid for. This is a dire consequence of such behaviour. More transparency and proactive communication would help. Such behaviour is why levels of switching and the major carriers’ reputations for customer service are so low.
I understand that mobile businesses are businesses not charities—we expect them to make a profit and invest in infrastructure; they employ hundreds of thousands of people and contribute millions to the Exchequer every year; they do many positive things—but they need to realise that it is possible to make a profit and give good customer service. A good start would be for operators to make switching easier, separate handset costs from service costs, make that clear in bills, which some do but many do not, and proactively communicate the best available deals to customers.
I ask the Minister and regulators to put more power back in the hands of mobile customers, and I ask mobile operators to do the right thing by their customers and avoid unnecessary regulation and legislation. I thank my hon. Friends for participating in this debate, at a much later hour than originally anticipated, and I particularly thank the Minister for taking his time to attend the debate. He brings vast experience to this arena, and I hope he will continue to work with colleagues in both the Department for Culture, Media and Sport and the Department for Business, Innovation and Skills to create an even more competitive, fairer and consumer friendly mobile market in the UK.
The Minister for Culture and the Digital Economy (Mr Edward Vaizey)
I am extremely grateful, Mr Deputy Speaker, for the chance to respond to this important debate brought by my hon. Friend the Member for Mid Worcestershire (Nigel Huddleston), in which there have been telling contributions from other hon. Members and hon. Friends.
I confess that at one or two points during the debate, I was confused. I was confused at the beginning, with my hon. Friend’s opening remarks about bedtime habits. I wondered where we were going, but I am glad we got back on to the straight and narrow, without straying too far from the subject. I was confused, too, by the movement on the Opposition Benches, and wondered which party each of the Members belonged to, but I knew that the hon. Member for Belfast East (Gavin Robinson) could not have been a member of the Labour party, because it is still debating its policy on this issue. It will come before the shadow Cabinet next Monday, but various labels in the shape of a mobile phone have been left around by different factions in the Labour party, which are expressing their position on this issue on each other’s doorknobs.
As time is short, I shall not give the House a potted history of my relationship with the mobile phone. It is, I think, telling for all of us that we can now measure our age in terms of our mobile phone acquisition. I can now say in a pub or club that I am old enough to remember buying my first mobile phone. My children will not be able to say that. It was, in fact, politics that brought me into mobile phone territory; I bought one when I was a candidate for Bristol East. I decided that, given that I was going to wage a vigorous campaign in the 1997 election, I would need a mobile phone. I can tell you, Mr Deputy Speaker, that it was very effective, as I turned a 5,000 Labour majority into a 17,000 Labour majority. My mobile phone and I have never looked back, and it is never far from my hand.
We need to talk about the subject in hand. It is an important subject: mobile contracts. It is no secret that there are probably more mobile phone contracts than there are now people in the United Kingdom. It is thus an important issue to pretty much every adult in the country. It is important that people feel that they are being treated fairly, and that, as hon. Members have said, they are given clear and accurate information and can switch providers easily. It is important that the switching process is made as easy as possible to help consumers and provide greater competition.
We have a good, competitive mobile market in the UK. We have four main network operators, but we also have what are known as mobile virtual network operators. The UK is relatively unique in having such competition in that respect, with companies such as Tesco and Virgin providing over-the-top networks. This kind of competition keeps prices low and means that consumers are offered a wide range of tariffs. It is also why the average price of a mobile package has come down by over two thirds in the last decade in real terms.
However, my hon. Friend the Member for Mid Worcestershire was right when he pointed out that there are low levels of trust in the mobile sector. In fact, one in four of us tends to distrust or strongly distrust mobile providers. We have discussed this issue with some of those providers, and it is obvious that they need to work to improve consumer trust, and that more needs to be done. To repeat my earlier point, that means access to clear and accurate information about the deals on offer, the basis on which charges are made, the quality of the service provided—my hon. Friend the Member for Wealden (Nusrat Ghani) intervened on that point—and how to complain when things go wrong.
Ofcom has taken action to improve the situation. It has set clear standards for contracts. It stops them, for example, from automatically rolling over, which used to be a practice in the industry. It has also ensured that when prices change, those price changes are communicated clearly. It is important, of course, that consumers can walk away if the price changes in a contract. In fact, mobile providers have been fined almost £3 million for mishandling complaints, and Ofcom publishes complaints on its website.
Although trust in the mobile providers is quite low, satisfaction with the service and value for money is quite high, with nine out of 10 consumers saying that they are either satisfied or very satisfied. We will continue to work with the industry to increase consumer confidence.
We have a number of principles when we look at this market. One is that consumers should not be trapped in contracts in which they are not getting the coverage they expected to get. Ofcom is discussing with mobile providers the possibility of their offering redress, which would include allowing customers to leave a contract when service was unacceptable. There is now a cooling-off period, which enables customers to leave a contract without incurring a penalty within 14 days of it starting. That allows those who buy mobile phones to check their coverage levels over the period, and to cancel their contracts if they are not receiving the coverage that they would expect. A lack of coverage in the home is the most likely scenario. We want to improve mobile coverage generally, which is why we signed a landmark deal to ensure that 90% of the UK’s land mass would be covered by the end of 2017.
Let me say something about switching, which is the main subject of tonight’s debate. As my hon. Friend the Member for Mid Worcestershire said, many more people switch their car insurance or their energy supplier than change their mobile provider, and the number of those who do so is falling. Those who do switch, however, find the process fairly or very easy. In 2011, we made changes through Ofcom. For instance, we speeded up the process for customers to switch mobile providers while keeping their phone numbers, which was important. However, we think that further improvements can be made.
In the summer, Ofcom published the results of a consultation on mobile switching As my hon. Friend said, there are two options. There is the gaining provider-led process—the new provider clearly has an incentive to make the process as smooth as possible—and there is a simplified version of the existing process. It is important for Ofcom to consult on that, and we look forward to seeing the outcome of its work.
As my hon. Friend mentioned in his excellent speech, we are seeking evidence across the economy in our search for ways of making it easier for consumers to switch providers. We have said that switching should be free to consumers unless they have consented to charges, and that that consent must be arrived at fairly: the consumer must understand what the charges are likely to be. The process must be quick, and must be completed on an agreed date. It should be led, by and large, by the organisation that has the most interest in making it work effectively. Consumers should have access to their consumption or transaction data, because that will inform them of the existence of what might be a better contract. If websites and tools are receiving payments from suppliers, they should make that clear, and should also make it clear how it affects the presentation of results. There should also be an effective way of enabling consumers to secure redress if something goes wrong in the switching process.
There are three stages in the process: gaining access to clear information, assessing and comparing the elements of the information gained, and being able to act on the information easily. We propose further measures to improve consumers’ ability to make informed decisions, which can be grouped into the same three stages.
First, there is the question of access. We want providers to ensure that billing and charges are clear by breaking down the separate elements of a bill. According to Which?—as my hon. Friend has pointed out, tonight and previously—70% of people are on the wrong mobile phone contract, in the sense that they are probably paying more than they should. Separating the various charges would make it easier to inform consumers. We also need to run consumer awareness campaigns, because consumers may think that switching is more difficult than it really is.
Secondly, there is the need to assess whether the new provider will give consumers the coverage that they want. Ofcom launched mobile coverage maps in the summer, so that consumers can compare the services and levels of coverage offered by different providers throughout the country. As I said earlier, gaining access to transaction and usage data in a suitable format will allow them to compare the different offers in the marketplace.
Thirdly, we are committed to making switching as easy as possible. We want to legislate for that, and we are looking into how we could do so. We will work with Ofcom in our part of the economy, as it were, with the aim of introducing, across the board, processes in which the gaining provider leads the switch, and customers have less contact with the provider that they are leaving. As my hon. Friend pointed out, when consumers leave providers, the providers introduce plenty of hurdles—or, as they might say, incentives—to encourage them to stay. We think that our work will help to ensure that consumers have a consistent, simplified experience when switching.
Obviously, we cannot be complacent. Ofcom’s work on mobile switching, and our commitment to quicker, easier switching in communications markets, will provide for an effective, consumer-friendly environment in which switching provider will be less hassle for the consumer. We will constantly consider whether further action is needed to ensure that consumers can take informed decisions and have absolute clarity about their mobile contracts.
Question put and agreed to.