MoneyMagpie

Jan 25

Watch out for dodgy broadband deals

Have you seen those big ads on TV and on posters for amazing broadband packages recently? They were all over the place and the big telecoms companies are still dangling similar offers in front of our faces to pull us in.

But research that MoneyMagpie has done with Relish, the simple broadband provider (which charges a £20 per month flat fee), has found that these ads are very misleading and the packages end up costing us all a lot more than we realised.

In fact we’ve found that consumers are currently losing £2.6 billion per year when committing to these ‘so-called’ offers.

How do these extra costs happen?

Watch out for dodgy broadband dealsThis overspend comes from unexpected broadband and line rental fees and the increased rental costs that are often introduced after just a few months.

The average Brit stays with their broadband provider for at least three years.

If you take a typical 12-month deal currently on offer to consumers, our analysis shows that a customer can end up spending as much as £156 extra each year, by automatically being locked into price hikes once their 12 month sign-up offer expires.

What’s being done about this?

Watch out for dodgy broadband dealsHappily, the Advertising Standards Authority (ASA) and Ofcom have announced that they are to clamp down on the way broadband providers advertise attractive deals to entice new customers.

Our research, and the move taken by the regulatory bodies, follows the a Government report A better deal, which aims to reduce costs for families when accessing essential services. In this report the Government says it wants ‘the full cost of a broadband contract’ to be made clearer to consumers.

I’m very glad that the Advertising Standards Authority and Ofcom are taking radical steps to regulate how these shiny broadband deals are advertised. Our research has demonstrated that these supposed offers are not good deals. We need clarity on the true cost of a broadband package and what the ‘deal’ actually means.

Will Harnden, Chief Marketing Officer at Relish, says “Our study just scratches the surface on the issues facing the broadband industry at the moment. We don’t think there’s any need for broadband to be as complicated as it currently is.”

Broadband deal analysis

The table is based on the current unlimited year broadband deals available to consumers as of the 20th January 2016.

BROADBAND DEAL ANALYSIS


Broadband deal analysed**
– most popular packages with UK consumers chosen for research

Sky

BT

Talk Talk

Virgin

Unlimited 38MB fibre broadband & line rental package

Unlimited 38MB infinity broadband & line rental package

Unlimited 38MB broadband & line rental package

Unlimited 50MB broadband & line rental package

The year 1 annual cost for consumers
for the ’12 month deal’

£329

£396

£212

£288

The year 2 annual cost once the ’12 month deal’ has expired

£449

£516

£332

£444

The year 2 annual cost rise once the ’12 month deal’ has expired*

£120

£120

£120

£156

Total additional cost imposed on consumer for year 2 and year 3

£240

£240

£240

£312

Estimated number of UK fixed residential & SME broadband lines in the UK: 23.7 million*

Industry market share*

22%

32%

14%

14%


Number of UK customers based on market share*

5,214,000

7,584,000

3,318,000

4,740,000


Total estimated cost imposed on consumers by provider,
based on the average time a Brit stays with their provider

£1,251,360,000

£1,820,160,000

£796,320,000

£1,478,880,000

Overall total in additional costs for Brits over year 2 and 3

£5,346,720,000*
Cost per year: £2,673,360,000*

*The total cost calculation has been based on:

  • The amount of estimated customers each provider has across the UK, worked out via facts & figures from Ofcom:
    • the market share percentages for each provider
    • the estimated amount of fixed residential & SME broadband lines in the UK
  • The average amount of time each Brit stays with their broadband provider (3 years), based on research by Broadband Genie

**Analysis does not include costs for router delivery and service installation

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