Ofcom is planning to introduce a ban on mid contract price increases on mobile phone, broadband and pay-TV contracts amid concern that customers’ contracts do not provide sufficient certainty about the prices they will pay.
It’s proposing a new rule requiring that any price written into a customer’s contract would need to be set any possible rises clearly including when those changes may occur.
The regulator says that competition between operators is helping to keep prices down with average prices for broadband and mobile services in the UK have fallen in real terms. At the same time, companies have been investing in upgrading their networks, while average speeds and data use have increased.
However, there is a growing trend for providers to impose an annual rise linked to inflation, plus an additional percentage of typically 3.9%, which Ofcom believes is undermining customers’ understanding of what they will pay.
“In the interest of transparency and fairness, customers should always be informed about price rises in clear terms of pounds and pence so that they can make an informed decision before signing on the dotted line. All too often, the mention of inflation-linked increases are buried in the small print of a contract,” said Peter Ames, broadband expert at Broadband Genie.
“We would also like to see Ofcom go even further with these proposals and allow customers to leave their contract penalty-free if the price hike they face becomes unaffordable for them.
Ofcom data shows that as of April 2023 four in ten (11 million) broadband customers and over half of mobile customers (36 million) were on contracts subject to inflation-linked price rises. It estimates that these numbers may grow further, to around six in ten of both broadband and mobile customers, as Three and Virgin Media apply inflation-linked in-contract price rise terms to more of their customers’ contracts during 2023/24.
More than half (55%) of broadband customers and pay monthly mobile customers (58%) do not know what inflation rates such as CPI and RPI measure. And of those who are with providers that use inflation-linked price rises, very few broadband (16%) and mobile customers (12%) were both aware of the price rise and able to identify that it was inflation-linked with an additional percentage.
Ofcom also found that even when people do consider future inflation-linked price rises when choosing a contract, they often do not understand them fully and find it difficult to estimate what the impact could be on their payments.
