Impact of Handset Bundling on Consumer Costs

This report examines the effects of bundled mobile phone contracts on consumer costs, particularly focusing on the handset loyalty penalty and the lack of price transparency. It outlines that most consumers are unaware of the true costs associated with bundled contracts, which combine the price of the handset with mobile service fees. Research indicates that in 73% of cases, purchasing a handset and service separately is more economical, yet 55% of consumers believe bundled contracts are cheaper. The report highlights the loyalty penalty faced by consumers who remain on contracts after the minimum period, resulting in an average overpayment of £22 per month, totaling £490 million across the market. Ofcom is currently consulting on measures to improve transparency and consumer notifications regarding contract end dates. The report suggests that mobile providers should adopt split contracts to clarify pricing and reduce consumer overpayments, while also noting that government intervention may be necessary if industry solutions are not forthcoming.