Mobile phone contracts extract high price for lack of vigilance

Imagine if your bank kept taking money from your account after a loan had been cleared and stopped only when you contacted it and asked what the hell it were at. You’d most likely be pretty annoyed, right?

You might be thinking there is no way a big and well-regulated company would ever keep taking money from you even after you had paid off what you had owed.

But you’d be wrong. There is a very good chance that every person reading this on a bill-pay contract who owns a phone which is more than two years old is paying more than necessary because they are still paying for a handset that they have already paid for.

And we are not talking about small change here either. Someone with a phone they got earlier than May 2019 could easily be worse off by hundreds of euro every year. The mobile phone companies know who you are and they know you are paying more than you need to but they will continue to take your money until you ask them to stop.

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There should be laws in place to stop this happening and, in fact, there are. They have been drawn up by the European Commission but the Government has yet to enact them and is facing fines for delays in doing so. But more of that in a bit.

Under long-established rules, once you come to the end of a two-year contract with a mobile phone provider, you own your handset and you are entitled to have it unlocked. Once it is unlocked you can switch to any operator on a Sim-only plan or you can stay with your existing provider but switch to a different tariff which means you will pay a lot less each month.

Often people coming to the end of a contract are offered an upgrade and the promise of a free phone. The deal might sound attractive, but it can frequently work against you.

For starters, the upgrade is not a reward, just a way to lock you into a new contract and the handset is never “free”. It is something you will have to pay for over the course of your new contract and it won’t even be slightly subsidised if you have to pay something towards it up front.

While companies – and phone makers – try to lure people into an endless cycle of upgrades, the reality is your phone is now so smart that it really does not have to be updated every couple of years.

Is the iPhone 12 really so much better than an iPhone 11? Quite apart from the cost to you, the cost to the environment is horrendous. And the lot of many of the workers who make the phones and mine the minerals that make the phones is often horrendous too.

But at least a new phone is something. But if you have an older phone and you haven’t been offered new deal you are almost certainly continuing to pay for a handset you already own and are paying a premium for absolutely no reason.

According to Darragh Cassidy of price comparison and switching site bonkers.ie, one of the “most common areas where people overpay on their bills is their mobile phone – particularly if it’s bill pay. With bill-pay plans you’re also paying for the cost of your handset, so these plans are usually way more expensive than pay-as-you-go or Sim-only deals.”

He points out that with bill pay, “depending on the phone you have chosen and the plan you signed up to, you’re often looking at paying around €40 to €60 a month, if not more. But once your contract has come to a finish, and you’ve paid off your phone, which is usually after 24 months, unless you want to upgrade to a new phone and commit to a new bill-pay contract, you’d be crazy not to look at a Sim-only plan, even just for a year perhaps.”

He says Sim-only plans start from €5 a month – so the savings can be huge. “You don’t necessarily even have to switch provider to get a cheap, Sim-only deal. You can usually change to a cheaper Sim-only deal with your current provider for a few months if you want to. Then when it’s time to upgrade to a new phone you can either buy one outright and stay on your low-cost, Sim-only plan or recommit to another 24-month, bill-pay contract.”

He stresses that if a person decides to switch provider the switching process “is very simple and you can keep your existing number no matter who you move to. However, if moving to a Sim-only deal with a rival operator you must ensure that your current phone is fully unlocked and therefore able to accept a rival operator’s Sim.”

If you’re out of contract with your existing provider they will be able to provide you with the relevant unlocking code – though sometimes this can be an overly laborious process and is an area where ComReg, as we have seen with Eir, really needs to step in and protect consumers better.

He says that providers have also benefitted from not having to inform customers when their contract was up, meaning many people would often end up paying more than they needed to after their contract had expired.

“This should, thankfully, no longer be the case going forward thanks to the EU’s new European Electronic Communications Code. Providers must now give at least one month’s [30 days’] notice to customers when their contract is about to come to an end, or where there will be changes to their contract terms and conditions. The notice must also inform customers of their right to end their contract without incurring any costs if they do not choose to renew the deal they’re currently on.”

The code also says contracts can be no longer than 24 months. However, member states can choose to enforce shorter contracts if they choose.

Another boost for consumers is that providers will also be obliged to give consumers ‘best tariff advice’ at least once every year. This means providers will have to advise their customers if there is a better product or plan available to which they can sign up.

Consumers should be aware that in most cases where you have chosen to opt out from marketing communications (as per GDPR guidelines), your provider may not be able to send you best tariff advice at all.

“There’s been little communication about all of this, which I find surprising as consumers need to know their rights. I also find it frustrating that once again it takes the EU to protect consumers and implement decent protections – this is something which Irish law should have covered long ago and which ComReg should have been shouting about from the rooftops,” Cassidy says.

While everything Cassidy says about the 2018 European Union directive, the European Electronic Communications Code, is on the money, there is a problem. It was supposed to be implemented in Ireland last December but we missed the deadline for implementing what amounts to the biggest changes to EU telecoms law in almost a decade, leaving the State facing significant fines as a result. When it confirmed that the deadline was to be missed, the Department of Communication said it needed more legal advice before it could become law.

Three customer pays high price after minimum term

Jack Murray experienced first hand what happens when you stay with your provider outside of the contract period. “I have a corporate account with Three Mobile with four numbers on it,” the mails starts. “Recently I was considering upgrading my iPhone X that I bought on contract with Three. I called Three Mobile customer service to see if I was due an upgrade. To my surprise, they told me that I was eligible for an upgrade since June 2020.”

Murray then enquired if he had paid his existing handset off since then and the agent confirmed that he had. “When I asked why Three Mobile hadn’t moved me to a cheaper plan, the agent said that it was up to me to tell her when I wanted to move. I pointed out that surely I should be paying a cheaper fee automatically once the handset was paid off. She said that this was company policy to leave customers on the same policy even if they had paid off a phone.”

“This is overcharging,” says Murray. On one number, he was paying €59.82 per month “and the customer-service agent confirmed that the €30 per month plan was the exact same service. When I asked to be moved she did it immediately, and the service is the exact same. On this one number, I was overcharged €29.82 for 10 months – this is a total of €298.20. But I have four numbers on that account and when I asked her the expiry dates on the other accounts I was alarmed. The overcharging amounts to an astonishing €1,912.40. One of the four numbers had been due a renewal since 2013. I was overcharged €15 a month for 100 months on that number.”

When he first raised this he was offered “€30 per account as compensation, a total of €90. I rejected the offer. They then came back and offered me €323 as a goodwill gesture. This represents less than 20 per cent of the money that I have been overcharged on the account. I have rejected that also.”

The company then came back with an offer of just under €500.

In one letter he received from the company, he was told Three Mobile “do not change customer price plans without contacting them previously and this is generally only done when restructuring of price plans is being completed, we are obliged to provide 30 days’ notice”.

It continued: “Your price plans were not being changed in any way so we would not contact you as there was no need to. In the absence of contact from a customer we make the reasonable assumption that you are happy with the price plan you are on if you contact us we will assist and provide your options as I can see happened recently. The primary responsibility remains with a customer to be aware of the offering they are availing of at any given time.

“When you initially select an upgrade you commit to a minimum period on that plan, this is usually 24 months. After that period expires you are no longer committed to that plan [and] various plans become available to you, however this is carried out by the customer if they want to avail of a different plan.”

He then got a second letter.

“When you upgrade a device it is subsidised and paid for either at the point of sale or is applied to the following bill, it is also possible that there is no charge for the device. It is not paid over the period of your contract. Given that you were entitled to move plans following the completion of your minimum term we are satisfied to provide a goodwill gesture of €323 as an account credit.”

And then he got a third letter.

“Given that you were charged at the agreed rate this would not constitute overcharging, as mentioned it is not incumbent upon us to lower your plan automatically,” he was told. “However, we do recognise that you could have availed of a lower rate and in that regard are willing to apply a gesture of 25 per cent credit (€478.10). This is our full gesture, if you want to accept it you can let me know and I will apply it.”

We contacted Three Mobile. We said it was strange that it was effectively charging every single one of its customer who has completed the minimum term of their phone contract for handsets they have already paid for. We also asked if it would confirm how many of its customers have completed the minimum term of their contract but were still paying a higher than necessary rate. We asked if this practice was standard across the industry and if Three Ireland believes it is fair to put the onus on customers to make contact when they have completed the minimum term of their contract to ask for a reduced monthly tariff.

This is what the company said in response. “When a customer signs up with Three Ireland, they are provided with the full details of their plan, including the length of their minimum term. As outlined in our terms and conditions, Three cannot change a customer’s plan at the end of the minimum term without it being requested by the customer.

“Once a customer’s minimum term ends, their plan will continue on the same terms and they will need to contact us if they would like to review this – this is industry standard. Three will then work with the customer to find the best option for them. In this instance, the customer did not contact us and continued to pay the agreed amount, no overcharging has occurred.

“We appreciate that this experience has caused confusion and upset, so we have offered the customer a monetary gesture of goodwill. Our customers are our number one priority and we are constantly working to enhance our customer experience.”

We also contacted other providers to see what they do in such situations.

“At present if we have permission (marketing preferences) we make contact with customers coming towards the end of their minimum term to advise on options going forward,” a Vodafone spokeswoman said.

“It may be that the customer is already on an optimal tariff that suits their needs; however, we will also give details of alternative tariffs they can switch to like, for example, our unlimited-data plans.”

She said customers could also review their tariffs to make any changes through the app. “This allows the customers to choose the option that best suits their planned usage and handset preference, ie whether they wish to avail of a new handset offer or keep their existing phone. Moving forward under regulation we will be permitted to broaden our tariff advice to all bill-pay customers coming out of contract (not only those who give us permissions) to inform them when their contract is coming to an end and what tariff options are available. We await adoption of those regulations into Irish law.”

An Eir spokeswoman, meanwhile, said that at the end of the minimum contractual postpay term “Eir contacts customers to offer them a subsidised handset if they renew their contract. Customers can also choose to move to a Sim-only plan at any time after the minimum period ends.”

It is important to note, however, that you will have to make contact to save the money as Eir is not going to do it for you.

How to get the best out of your mobile phone package

We asked Darragh Cassidy from bonkers.ie for some tips on how to find the best value for money mobile deal. This is what he came back with.

When it comes to choosing the best plan for your individual needs, cost is usually the main consideration, but there are a few other things that you’ll want to consider such as:

5G v 4G: 5G is obviously all the talk these days. However, some providers are charging customers extra for a 5G-enabled plan. But coverage outside the main towns and cities is still very patchy, if existent at all. Meaning you could end up paying for something you can’t use. And while 5G can reach speeds up to 10 times faster than 4G, for the vast majority of people, 4G is more than capable of handling their data requirements.

Fair-usage policy: all providers offer the lure of unlimited calls, texts and data but when you delve into the details there’s usually a limit. Yes, it’s a high limit that most people won’t ever reach but it’s still important that people understand exactly how much data in particular they have. I personally cannot understand how the ASAI and ComReg haven’t take the providers to task on this.

Network coverage: this is probably even more important to consider than price as there's no point paying for something that won't work. Vodafone's coverage is usually regarded as the most reliable and extensive but it really depends on where you live. ComReg's outdoor mobile coverage map is a good tool for consumers to see how all the operators compare in a particular area.

Be aware that Clear Mobile, An Post, Virgin, Lyca, 48, GoMo and Tesco Mobile are all MVNOs, so their coverage will generally be the same as the operator network they’re running on. Clear Mobile and An Post are with Vodafone, GoMo is with Eir, while all the others piggyback off 3’s network.