Mobile Phone Contracts

Philip Hollobone Excerpts

Tuesday 16th January 2018 Westminster Hall

[Mr Philip Hollobone in the Chair]

[Mr Philip Hollobone (in the Chair)]

Order. The sitting is resumed, and the debate may continue until 5.15 pm.

[Patricia Gibson]

Thank you, Mr Hollobone. As I was saying before the Division bell sounded, the fact is that most providers do not tell the customer how much of their monthly bill goes towards the mobile handset and how much is paying for their calls and data. Citizens Advice has discovered that three of the four largest mobile providers continue to charge customers for a handset after the cost of the handset has already been paid during the term of the fixed deal. That means that loyal customers who choose to stay on the same phone plan after their fixed deal ends see no reduction in their bills. They continue to pay, unwittingly, for a handset for which they have already paid.

Who is most likely to be caught up in this so-called loyalty trap? Those aged over 65 are most likely to be stung, with 23% of over 65s with a handset-inclusive mobile phone contract staying in their contract for more than 12 months past the end of their fixed deal period, compared with only 13% of people aged under 65. Worse still, if someone does not switch they cannot tell how much their handset is costing them, and whether they are getting a good deal or not. Indeed, the total cost of a handset as part of a bundled contract can vary considerably, even among plans offered by the same provider. In some cases, the price difference can be as much as £400. Of the 706 bundled contracts analysed by Citizens Advice, 74% were more expensive than buying the same handset up front and using it with a SIM-only contract, which is quite astonishing.

Three, one of the largest mobile phone providers, has been in touch with me. That company recognises that the way the market is currently organised means that mobile bills lack transparency and are difficult for consumers to comprehend, which in turn leads to them paying more than they should—that is, more than they need to—for their mobile phones.

--- Later in debate ---

[Margot James]

Although I have not come to a settled view on the matter yet, I agree with the hon. Lady that what has gone on so far—there has been an over-reliance on the mobile phone providers putting their house in order—has not worked to my satisfaction, given that 1 million people are still overpaying.

I am aware that some stakeholders would like to see the end of bundled mobile phone contracts, and want all contracts to be split, with the cost of the handset split out from the cost of services. The pricing of split contracts can be more transparent for consumers than bundled contracts, although split contracts are not without consumer issues. At the moment, providers can make a commercial decision to offer split or bundled contracts, or a choice. A number of mobile phone providers now offer only split contracts and others, such as Tesco Mobile, continue to offer both split and bundled contracts. Other groups, such as EE, Vodafone and Three, offer only bundled contracts. As I said earlier, it is a highly competitive market, in which consumers have a wide degree of choice, including in relation to whether to opt for a bundled or a split contract. However, I accept that when people who are not knowledgeable about the complexities of the market are dealing with a household name that offers only a bundled contract, that is not a great deal of help.

Consumers may choose bundled contracts because they continue to offer good value for money for many consumers. Ofcom research from last March found that such contracts are particularly good value for mobile users with medium to high usage, but such deals can obscure overcharging, as the hon. Lady so ably highlighted. We are therefore prepared to intervene if we deem that to be the only way to resolve this issue. I am committed to preventing people from paying too much by remaining on the same bundled contract after the end of the contract period. No one should continue to pay for a product that they have already paid off. Ofcom, our independent regulator, is continuing to monitor this issue closely. I expect to see movement to address this issue from the mobile operators.

I remind hon. Members that this year the Government will publish a consumer Green Paper, which will explore further ways we can help to protect, support and empower consumers, including those in the mobile communications market. I very much agree with the hon. Lady’s remark before we suspended for all the votes that mobile telephony has become a crucial utility that most people simply cannot do without.

I reiterate my thanks to the hon. Lady for securing this debate, and I thank all hon. Members who contributed to it. I will leave her a few minutes, if she requires them, to make a few closing remarks. Before that, I reaffirm my commitment to work with Ofcom, the mobile providers and organisations such as Citizens Advice to address this issue and broader issues in the telecoms market that consumers face.

[Mr Philip Hollobone (in the Chair)]

Order. I am afraid it is not in the Minister’s gift to offer the sponsor of the debate a second go during a half-hour debate.

[Margot James]

I apologise for that, Mr Hollobone.

[Mr Philip Hollobone (in the Chair)]

Apology accepted.

Question put and agreed to.