Pay as you go, SIM-only and contract are the main options for owning and using a mobile phone.
In the last few years, consumers have started to move away from contracts, which allow the customer to acquire a phone without paying for it upfront. In theory, this makes expensive handsets more affordable.
But now, not even the lure of the latest iPhone or other hot new handsets on a contract is enough to make mobile users upgrade.
Instead, more consumers are starting to choose SIM-only deals.
Why are they holding onto their handsets? What’s going on?
Handsets have become too expensive
The bottom line is that handsets have become too expensive.
The latest iPhone, for instance, will cost the customer more than £1,000. Forty per cent of the people over 30 who took part in a survey said that upgrading to a new handset was too expensive.
On a SIM only deal, the consumer only pays for using the network, which is much cheaper. They can save as much as 70% on their mobile phone bill by switching to one.
It’s also like having a contract and they can get deals on call minutes, texts and data. They just don’t have to pay for a phone.
Alerts from Ofcom and Citizens Advice
The telecommunications watchdog Ofcom and Citizens Advice have woken consumers up to the fact that they may be paying too much for their contracts.
Once the customer comes to the end of their contract, they’re free to switch to a cheaper, SIM-only deal.
Ofcom commented that around 1.5 million people are continuing to pay for their handset after the minimum contract period has expired. They’re paying approximately £330 million more than they need to on their mobile phone bills.
By law, mobile phone networks have to notify their customers when their contract is about to expire. They must inform them of any deals they can offer.
Smartphone is unlocked
SIM-only deals give the mobile phone user a lot of freedom.
Since the smartphone is unlocked, the user is free to sign up with whichever network they want. This is different to contract phone deals. Often, the customer must use it with a specific network to receive the phone.
This flexibility is handy when travelling abroad, too. The phone owner can use alternative SIM cards to save money on data and calls.
The fact that contracts include the phone means that the minimum period before the contract expires is longer. Contracts tend to be two years, whereas SIM-only deals last generally for a year.
In fact, some networks offer rolling monthly SIM-only contracts. This stops the customer from having to stay with the same network for too much longer than they might wish to.
This could be the end of contract deals, with consumers preferring to hold onto their handsets and spend their cash on other things.
The only thing that may save them is the fact that paying for a handset and a SIM-only deal separately is more expensive than signing up for a contract.