Why are consumers not switching their broadband and mobile providers?

Summary

• Data from Ofcom’s Switching Tracker shows that switching rates across broadband and mobile markets have remained stagnant since 2020, with rates particularly low for broadband (10%) compared to mobile (15%).
• Whilst there are various factors which can affect the likelihood of an individual switching, our analysis found:
  • Bundling of multiple services together with broadband increases the switching costs for consumers, deterring them from switching. Consumers who buy a bundle including Pay TV alongside their landline and broadband are 2.6% less likely to switch than someone with just broadband or/and landline. When mobile is added to the bundle, they are two times less likely to switch (5.1%).
  • The inclusion of a handset in a mobile contract makes it more difficult for consumers to switch. Consumers who are on a SIM and handset mobile deal are 4.7% less likely to have switched compared to those on a pay-as-you-go deal. 
  • Consumer loyalty to their providers, the belief that search costs are too high, and concern for losing service all also decrease the likelihood of a consumer switching their broadband provider. By contrast, only consumer loyalty affects the likelihood of switching mobile networks.

Introduction

In December 2023, Ofcom published a consultation proposing to ban inflation-linked in-contract price rises in the communications sector and requiring providers to set out their prices in pounds and pence. However, unspecified discretionary price rises will remain permissible and this has led Which? and other consumer advocacy organisations to raise concerns that providers may pivot towards these types of rises instead.

Unspecified discretionary price rises are sometimes perceived as less harmful to consumers since they must be accompanied by the right for customers to exit penalty free within 30 days of notification of the increase. However, the effectiveness of this mitigation depends on the propensity and ability of customers to switch providers in response to a price increase.

The most recent data from Ofcom’s Switching Tracker shows that switching rates across the telecommunications markets have remained stagnant over the last three years, with the rates for broadband having been consistently lower than mobile. The switching rates for both broadband and mobile, 15% and 10% respectively for 2023, are relatively low compared to other utilities (20% for electricity and 18% for gas in 2020 before prices reached the Energy price cap and removed any financial incentive to switch providers).

 Switching rates have been stagnant in the last three years

Despite the real savings consumers can get from switching, the switching rates are low due to consumers facing a range of barriers including confusing switching processes, bundling, loyalty to their current provider and general concerns such as service downtime and mistakes made when switching.

In this article, using the latest data from Ofcom’s Switching Tracker and Switching Experience Tracker, we identify the different factors likely to influence the propensity of consumers switching their broadband and mobile network providers. Then, we conduct regression analysis on these factors to discern which ones have an effect on switching.

Factors affecting the likelihood of switching

Various factors ranging from the market structure to consumer sentiment have been proposed to affect an individual's likelihood of switching their broadband and mobile network providers.

The difficulty in switching or uncertainty around the process contributes to why consumers don’t switch. Switching rates have consistently been higher in mobile markets and whilst there may be other factors involved, the higher rate may in part, have been influenced by the implementation of ‘Text to Switch’ which made it easier for consumers to switch. Whilst a similar service, ‘One-stop switch’, exists for broadband it covers only providers using Openreach. A whole-of-market process, One Touch Switch, was announced for broadband back in 2021 after being regulated by Ofcom, but providers have so far failed to deliver the service despite regulatory deadlines.

Consumers themselves have also expressed concerns around the complexity of current switching processes. Data from the Switching Experience Tracker shows that more than a quarter of telecommunications consumers who considered switching but decided against, said that concern about paying for two services at the same time and aligning the timing of both contracts were major factors in influencing their decision.

Consumers who decided not to switch are worried about aligning their old and new services and having to pay both providers simultaneously

Other barriers to switching across both mobile and broadband markets include search costs associated with looking for a new provider, which may be high since broadband and mobile contracts have multiple attributes, while consumers perceive them as technical and challenging to understand. Evidence from the Switching Tracker shows that consumers feel that the benefits from switching are not worth the time and resources they will have to put in. Two-thirds (63%) of mobile and over half (54%) of broadband users in 2023 believe that the savings they could make on a new deal would be too low to be worth their time looking for one. Additionally, 43% of mobile and 48% of broadband users claim they would like to save money on a cheaper deal, but don’t have the time to look into different deals.

Another factor is the bundling of multiple communications services, which is a common feature in the broadband market. In 2023, half (51%) of consumers were using bundled services with their broadband, with a fifth having Triple Play and another fifth with Dual Play. The bundling of multiple services might reduce switching for a variety of reasons. For example, it could increase search costs for consumers as more research is needed to find alternative providers for their various bundled services. Alternatively, a customer may be particularly attached to one element of the bundle or a provider may offer a discount for a bundled package and this might dissuade a customer from wanting to undo their bundle.

Dual Play and Triple Play bundling of broadband services are the most common package type

This could also explain some of the difference between switching rates in mobile and broadband as bundling is not as commonly found in mobile markets. However, there are also package deals in mobile which can hinder switching. Typically, handsets are bundled together with SIM cards, which would make it harder for consumers to switch. This was the most common type of deal in the market from 2020-2022 but has recently been overtaken by SIM-only contracts as of 2023, suggesting that consumers are starting to prefer more flexibility in their mobile deals. 

SIM-only mobile network contracts have been increasing in popularity

Generally, consumers prefer to stick with the brands that they are familiar with and this loyalty they feel towards their provider can result in an inertia towards switching providers. According to the Switching Tracker, 46% of telecoms consumers said they felt some loyalty to their provider and would not change unless there was a very good reason. More than two-fifths of customers in 2023 have been with their provider for more than 5 years (44% for mobile; 43% for broadband).

This inertia in switching can also be attributed to consumer concerns about unforeseen negative effects after switching. In 2023, half of telecommunications customers stated that the risk of losing service when switching is a deterrent to looking for other providers and over half (55%) were worried about things going wrong if they changed provider.  

Analysis of factors affecting the likelihood of switching

To understand how these factors affect an individual’s propensity to switch, we have conducted a regression analysis using data from Ofcom’s Switching Tracker [1]. The variables included in the regression are as follows:

• Search costs in looking for a new provider based on consumers who thought that it was worth the time and effort to look for a new deal;
• Bundling structure for broadband / deal type for mobile; 
• Loyalty towards their provider based on consumers who reported feeling loyal and would not switch without a good reason;
• Consumer concern about the risk of service downtime when switching;
• Satisfaction with providers;
• Current provider;
• Demographics (socioeconomic group, age, gender); and
• Time variable to control for year on year changes

This table presents the statistically significant results from the regression analysis, showing the probability of having switched in the last 12 months across broadband and mobile markets. 

The findings indicate that the way these services are typically sold impacts on people’s likelihood of switching for both broadband and mobile services. Bundling broadband with other services and the inclusion of handset tie-ins in mobile contracts reduces consumers’ willingness to switch their broadband and mobile provider. With broadband in particular, we find that by adding a service moving from Triple Play to Quadruple Play bundling, it decreases the probability of having switching twofold. This supports the hypothesis that the tie-in of products and services act as a hindrance for consumers to switch as there are even more complexities to untangle.  

Consumers’ loyalty to their provider also plays a role in influencing their likelihood of switching for both broadband and mobile. This highlights people’s reluctance to move away from the familiarity of their current provider without a strong motivating factor, suggesting the difficulty of increasing consumer engagement within the market.  

Meanwhile, the fear of losing service whilst switching was a statistically significant factor for broadband but not mobile. This could be due to the market-wide availability of Text to Switch in the mobile sector and the fact that broadband switches can have more uncertainty attached to it, for example, having to wait for a new router or needing specialist installation for it. 

Another difference between the two markets is the influence of search costs on the propensity to switch. Consumers who think the search costs needed to look for a new deal are worth it are more likely to have switched their broadband in the last 12 months, but surprisingly this has no effect for mobile network switching.

Conclusions

Generally, switching rates among consumers across broadband and mobile network services have been consistently low, especially for the broadband sector with only one in 10 having switched in the last 12 months. Through the analysis, we found a myriad of barriers that deter consumers from switching, calling into question whether consumers will take the opportunity to switch even with the assurance of a penalty-free exit under discretionary price rises. This effectively allows providers to implement discretionary price increases with little concern about customer churn. 

There are steps Ofcom can immediately take to reduce switching costs for consumers such as the robust enforcement of One Touch Switch in the broadband market to make switching less cumbersome for the whole of the market. Ofcom can also strengthen existing obligations on providers by, for example, providing more information about alternative offers and giving them more time to exit, which are likely to reduce search costs faced by consumers.  

However, it seems likely that such regulatory actions above may only have a small impact on switching. For example, ‘One-stop switch’ has already been implemented for Openreach customers - a large proportion of the broadband market - yet switching rates are still low. Additionally, the analysis shows that there are also other factors which impact the likelihood of switching such as bundling and consumers’ loyalty to their provider, which will prove difficult to disentangle.

Given that switching barriers are difficult to reduce, then if more providers begin to adopt discretionary in-contract price rises following a ban on inflation-linked price rises, there will be an increase in consumer detriment in the sector. To disincentivize providers from pivoting to this practice, Which? recommends that Ofcom send a strong signal to providers by announcing a regulatory review of unspecified discretionary price rises. In the event that providers are not disincentivized, new rules should then be introduced such that the only permissible reason for providers to apply a discretionary price increase is for changes imposed by law.

Footnote

[1] All factors except complexity of switching processes were included as the data on complexity of switching processes was from the Switching Experience Tracker which can not be combined with the main Switching Tracker data  ↑