Ofcom moves to ban mobile and broadband mid-contract price hikes

Ofcom has told telecoms companies that customers must be told upfront about mid-contract price rises included in their contract under new consumer protection plans set out by the regulator.

Most major phone, broadband and pay TV companies now including mid-contract price rises linked to inflation.

In recent years, pricing practices where providers impose an annual rise linked to future inflation, plus an additional percentage, usually around 3.9%, have become significantly more widespread, meaning that customers end up paying much more than they originally planned for towards the end of their contract.

Around 11 million broadband customers (four in ten) and 35 million mobile phone holders saw their bills increase last April. And Ofgem believe that these figures could rise further next year, estimating around six in ten broadband and mobile customers will be affected.

Despite being set out within the contract’s terms and conditions, awareness and understanding is very low.

More than half (55%) of broadband customers and pay monthly mobile customers (58%) were unaware of how inflation is measured.

And of those who’re with providers that use inflation-linked price rises, very few broadband (16%) and mobile customers (12%) were aware of the price rise and able to identify that it was inflation-linked with an additional percentage.

Those who do consider future inflation-linked price rises when choosing a contract, also don’t fully understand them and find it difficult to estimate what the impact will be on their payments.

To guard against this and provide greater protection for customers, Ofcom is proposing to ban the process.

They plan to make telecoms companies write price increases in pounds and pence into customer’s contracts at the point it’s taken out. This include making it clear about when any changes to prices that they’ll face.

This would stop providers being able to include inflation-linked, or percentage-based, price rises in all new contracts.

 

What are mid-contract price rises?

Mid-contract price rises are when a provider increases the cost of your monthly broadband or mobile phone bill during your contract term.

They occur once a year in April and are tied to the Consumer Price Index (CPI) inflation figure that’s published every January.

Many providers add a further 3% to the inflation figures to help offset their own rising business costs.

Can I leave my contract to avoid mid-contract price rises?

Whether you can leave mid contract depends on the terms and conditions of your contract.

Usually a fixed contact for a service means that you’ve both agreed to pay a set amount each month on an agreed date.

However, broadband and mobile phone contracts are different – they tend to stipulate the price could increase mid-contract.

If price increases are included in your contract and you don’t agree to the terms, you won’t be able to sign up for the service. You’ll have to find a provider who doesn’t include yearly increases in their contracts but there are very few of these.

Essentially if you want to leave your contract because of these price rises and have agreed to the term and conditions, you will have to pay exit fees.

What are social broadband and mobile tariffs?

Social tariffs are cheaper broadband and phone packages for people claiming universal credit, pension credit and some other benefits. Some providers refer to them as ‘essential’ or ‘basic’ broadband.

They’re delivered in the same way as normal packages, just at a lower price.

Here’s how they can help:

• They’re cheaper than a regular package with current prices ranging from £10-£20.
• Most tariffs offer superfast broadband at speeds over 30 Mbit/s – fast enough for you to keep in touch with friends and family, stream HD films or shop online.
• They’ll cost you next-to-nothing to set up – if you do have to pay anything it’ll only be a small amount.
• If you provider offers a social tariff it won’t cost you anything to switch.
• The prices won’t increase mid-contract so what you agree is what you pay throughout.
• And it costs you nothing to leave mid-contract.

If your current provider doesn’t have a social tariff, they may allow you to leave your current contract without paying a penalty.