With the rising cost of living starting to bite, some regulators have mandated social tariffs for connectivity. However, such plans have often faced the same challenges of low awareness and adoption as the voluntary initiatives put in place by operators
With many consumers facing a cost of living crisis, several operators have launched (or improved) social tariffs aimed at helping ensure households have affordable broadband access. In the UK, these discounted tariffs typically cost on average £15-20 per month and are available to households receiving various benefits.
Operator-led social tariffs for vulnerable consumers have existed for a number of years, but are characterised by low awareness and take-up by eligible customers. With some operators either not offering such tariffs or not being seen to market them proactively, regulators and consumer bodies are keen the sector does more.
Some regulators have introduced mandated social tariffs for connectivity, such as in Belgium, Ecuador, France, Latvia, and Portugal. These interventions represent a direct alternative to operators’ own initiatives; however, evidence suggests they face the same problems with awareness and uptake.
Until take-up improves, there remains the likelihood of further policy intervention. Information campaigns would raise awareness of voluntary social tariffs, while simplifying the sign-up process and widening eligibility criteria could help boost adoption.
Telcos have taken steps to support customers, including through voluntary social tariffs
In the telecoms sector, operator-led initiatives to support vulnerable customers have been available for a number of years. However, amid a backdrop of low economic growth and high inflation having sparked a cost of living crisis for many households, government and industry are looking to do more to help consumers cope with mounting pressures on their finances. In the UK, a number of providers are now offering additional discounted tariffs for connectivity (see Table 1).
In other countries, operators have made available similar tariffs. In Spain, Vodafone launched the ‘Conectad@s Rate’, a €10 per month tariff, which provides 15GB of 5G data and access to online training platforms to help young people find work. In Canada, 14 ISPs are offering 50Mbps/10Mbps broadband services for C$20 per month to low-income families and seniors as part of the ‘Connecting Families’ initiative. Similarly, US operators, such as AT&T, Comcast and Verizon, have committed to offering ‘high-speed internet plans’ for $30 per month or less. According to the Government, these packages deliver minimum download speeds of 100Mbps, enabling a typical family of four to video conference, stream movies or TV, and more. Under the 2021 Bipartisan Infrastructure Law, the US created the Affordable Connectivity Program (ACP), which provides eligible households with $30 per month off their internet bills – and in some cases a one-off, $100 contribution to device purchases. Eligible families who apply their ACP benefit to an operator’s discounted plan can therefore access telecoms services at no cost.
Low awareness of discounted tariffs is a barrier to adoption among eligible households
Despite offering good value for money, voluntary social tariffs are characterised by low awareness and take-up by eligible customers. Firstly, not all operators have voluntarily launched such tariffs. In the UK, for instance, TalkTalk has stated that it does not because it has its own scheme, developed in conjunction with the Department for Work and Pensions, which offers free 40Mbps broadband to jobseekers for six months. Availability not always being market-wide can cause confusion among potentially eligible customers, which can be compounded by a general low awareness of social tariffs. This results in sluggish take-up of a product that would otherwise help financially vulnerable groups.
Surveys suggest that there is a real lack of consumer awareness around social tariffs, with the majority of those eligible not aware they exist. Even where they do exist and awareness is strong, some benefit claimants may be unsure of the eligibility criteria, thereby presenting a further barrier to adoption. In February 2022, Ofcom reported that 4.2 million low-income UK households are eligible for specially discounted broadband packages, but only 55,000 households (1.2%) have taken them up, with millions missing out on average savings of £144 a year. Limited advertising of social tariffs by operators and the absence of such plans on price comparison websites is also said to be affecting adoption. While certain operators are arguably more proactive in their marketing than others, consumer bodies, the regulator and Government have been critical as to whether the sector is doing enough.
Regulated social tariffs introduced in some markets have faced similar challenges
In light of the challenges around voluntary measures, and the increasingly difficult financial situation faced by many consumers, some countries (see Table 2) have introduced regulated social tariffs. In effect, such interventions represent a direct alternative to operators’ own initiatives, with the regulator stepping in to define the bundle(s) of telecoms services and the associated monthly price. In Belgium, the mandated social tariff is a discount for fixed telephony and/or fixed broadband, which since 2012 must be offered by operators with annual turnovers of €50m+. Meanwhile, in Portugal, the tariff consists of a 12Mbps/2Mbps fixed broadband service and costs €5 (ex. VAT) per month plus a capped activation fee, with the price reviewed annually to ensure affordability. Other countries, including Australia, Croatia and Malta, require the universal service provider to offer reduced tariff options for low-income customers, which in Telstra’s case must be endorsed by consumer advocacy groups, although the regulator has stopped short of setting prices.
Despite regulatory intervention, evidence suggests that awareness among eligible consumers is (again) a common problem. In Portugal, the regulator ANACOM estimates that more than 780,000 households could benefit from the social tariff and launched an information campaign across media, radio and social channels to target eligible households, as well as schools, student associations and local authorities. The tariff has been available since February 2022 and operators must promote it in “adequate” ways; however, uptake so far has been slow, with just 660 applications received. In Belgium, the BIPT is reviewing the current framework for regulated social tariffs, given that nearly a quarter of eligible households were unaware of it. The regime is also considered too complex; almost 10% are discouraged by the bureaucracy that comes with the sign-up process, which requires the BIPT to approve any application a consumer makes to their chosen provider.
Concerted efforts to raise awareness could be more effective than regulatory intervention
Experience suggests that regulated social tariffs face similar problems (e.g. low awareness and low take-up) to voluntary ones, and may not be any more advantageous in helping consumers cope with a rising cost of living. The existing social tariffs introduced by industry can support those with affordability problems, while reducing bad debt and contact costs for operators as customers receive a bill they are more likely to pay in full. These tariffs are often not subject to annual price rises or exit fees. Depending on the level of the regulated price, mandated tariffs could place a significant financial burden on telcos and, especially if set below cost, could even risk them having to impose price rises on other customers.
Given low adoption in both scenarios, there is a need for the telecoms sector to work with stakeholders across government, local authorities, consumer bodies and housing associations to take further steps to boost uptake among eligible households. Given the need to raise awareness, multimedia information campaigns should be a first step. Also, advertising guidance (if developed collaboratively) could provide operators with certainty around how voluntary social tariffs should be displayed and marketed prominently on their website, apps and social channels. In addition, driving adoption could be achieved by simplifying the sign-up process and widening eligibility criteria. Facilitating access for a broad range of customers, including those in receipt of disability, unemployment, pension and other benefits, coupled with cross-promotion by organisations across the benefits system could boost take-up. Until uptake of voluntary social tariffs improves, there remains the possibility of regulatory intervention.
