Mobile contracts get shorter, but at a price
A new EU legislation has banned the sale of 36 month mobile phone contracts and forced providers to offer 12 month deals.
As well as protecting consumers from getting trapped into lengthy contracts, the move has led to an explosion in the number of 12 month deals available, bringing freedom and choice to those who don't want to commit.
The independent price comparison and switching service, uSwitch.com, welcomes the new EU legislation that came into effect from 1st May, banning 36 month contracts while also forcing phone retailers to offer the option of a 12 month contract. As well as preventing consumers from getting locked into lengthy contracts, the move has led to an explosion in the number of shorter deals available, giving consumers more choice and freedom to move around. In February there were just 279 12 month deals on the market, but the figure has now rocketed to 4,765.
But there is a sting in the tail. Longer contracts enable providers to lower monthly bills for consumers, as they have longer to claw back their costs. . The death of the 36-month contract has already signaled the end of some of the cheapest deals on the market. Last month, mobile users could get a plan for just £5 a month if they were prepared to sign up to a 36 month deal, but now the cheapest pay monthly plan on the market is £9 - nearly twice the price.
Free phones are also under threat - especially smartphones. These high-tech objects of desire were the biggest reasons behind the growth of longer term contracts as providers could reclaim their higher costs by tying the customer into a long contract. Now, with the death of the 36 month contract, getting hold of a smartphone comes at a higher price.
Consumers can lay their hands on the popular HTC Desire for free with a £15 a month contract if they sign up for 24 months, but those looking to take advantage of the new shorter 12 month contracts will have to fork £35 each month - more than twice as much. The Apple iPhone 4 and Samsung Galaxy S II aren't available at all for free on a 12 month contract. The penalty of a short contract is a £299 or £309.99 cost for the handset up front.
Ernest Doku, technology expert at uSwitch.com, comments: "This new ruling has not only culled the growth of lengthy contracts, but has also opened the door to a new wave of 12 month deals - great news for those savvy customers who want the freedom to move around each year.
"Originally lured by cheap monthly costs, three years down the line consumers were finding themselves saddled with an obsolete phone, not to mention a contract that no longer suited their needs. With over three thousand 36 month deals on the market before the ban, this law was brought in just in time.
"However, it isn't all good news. As a general rule, the longer the contract, the lower the monthly fee, so it's possible that average contract costs will now rise. Providers may compensate by stopping to offer the latest handsets for free on shorter contracts, potentially bad news for those who can't afford the initial cost of a shiny new phone.
"People need to consider what they want from their phone, how they will use it and ultimately what they can afford. Paying for the handset upfront could be the best way to get a cheap deal, but only for those who can afford it. But if low monthly bills are more important than getting a new phone or tariff every year, it may be worth considering the commitment of a 24 month contract. Thanks to the ruling, now is also a great time to shop around for one of the new 12 month deals, as there is plenty of fresh competition in the market."