UK Government to Investigate Dodgy Broadband ISP Pricing

The Department for Culture, Media & Sport (DCMS) will today pledge to further improve consumer switching between providers and to investigate whether home broadband ISPs are hiding the true cost of their services, such as via confusing discounts and or line rental charges etc.

Today’s announcement follows last month’s call for a new set of Switching Principles, which among other things proposed that you should able to switch your electricity, gas, bank accounts, telephones, broadband and or TV providers both “quickly” and “without charge” (details).

Apparently the Government believes that it could save UK families as much as £470 a year on their utility bills by tackling abuses in the market (e.g. hidden charges), improving existing processes and cutting red tape in certain industries (e.g. giving consumers a choice of water supplier).

The full 25-page document can be read online (PDF) and after a quick search the only relevant piece that we could find for broadband provision was this bit.

Transparent pricing in broadband advertising

Customers rely on adverts to choose the right broadband product for them. They should not be misled. The government wants to ensure consumers understand the full cost of a contract and are not misled by teaser rates. For example, government analysis of research by Citizens Advice shows that total costs can be £240 a year higher than the headline introductory rate for fixed broadband.

The Advertising Standards Authority (ASA) is looking at whether teaser rates on broadband deals are misleading consumers, and the government expects the ASA to take swift action to ensure that prices are made clearer and costs are not hidden. The ASA will publish research into this area in January 2016 and will publish proposals later in the spring.

The related Citizens Advice study was published in July 2015 (here) and suggested that some “hidden charges” included phone line rental, starter fees and router delivery costs. At the time they also called for more “all in” packages, where consumers are only required to pay a single fee for the entire service.

However these days many ISPs do in fact mention the cost of line rental and router delivery charges on their packages. On top of that the study also failed to reflect that different network platforms may require a different approach, so you can’t easily apply one rule to everybody.

For example, not all ISPs on BTOpenreach’s network, such as those offering fixed line ADSL or FTTC broadband services, require you to take phone line rental from the same provider. You can mix and match. Likewise a pure fibre optic ISP doesn’t have to deliver a traditional copper phone line and can more easily offer an “all in” service via VoIP.

George Osborne, Government Chancellor, said:

“This broad package of reforms will make markets work better for families. Driving competition will improve choice for people and ensure they get a better deal. And cutting red tape will help businesses grow and thrive.

It’s the government’s responsibility to help foster the right conditions for competition and investment across the UK – that’s why the concrete steps we’re announcing make sure government, regulators and local authorities all play their part in promoting competition and removing market distortions.

It’s all part of our long-term plan to boost productivity and make the UK the most prosperous and secure of any of the major economies of the world.”

It’s also worth pointing out that broadband provision is a much more complicated animal than gas, water or electricity. In the former you can pay less and still receive a very similar service, although support quality may vary. By comparison paying less for broadband can sometimes mean slower service speeds and worse reliability.

On the other hand there is certainly still room for improvement and some providers do have a very nasty habit of hiding their more contentious charges inside the small print, which often involves a mountain of perplexing legal babble. In that sense we’d welcome a requirement for clearer pricing, especially on discount offers, although the ASA hasn’t always been very tough on the enforcement side of that equation.