Mobile Telecommunications Market: Contracts

Nigel Huddleston Excerpts

Tuesday 24th November 2015 Commons Chamber

[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)—

[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.