Mobile Telecommunications Market: Contracts

Lord Vaizey of Didcot Excerpts

Tuesday 24th November 2015 Commons Chamber

[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.