UK Consumers Warned to Switch Broadband ISP or “Pay through the nose”

A new study has examined the average price of broadband and line rental across the biggest six ISPs, which finds that out-of-contract prices have increased by 38% for copper (ADSL) connections and 19% for “fibre broadband” between 2011 and 2016. But in-contract prices have barely changed.

The uSwitch.com study draws the obvious conclusion that people who don’t switch once their contract has ended are likely to be left paying a significantly higher price, with out-of-contract prices often suffering a sharp rise because this is when many initial discounts come to a close (see below). By comparison in-contract prices have only risen ever so slightly since 2011, reflecting a monthly rise of just £1.12 for ADSL and 54p for “fibre” broadband.

In fairness this isn’t a new development and indeed it’s fairly normal for big ISPs to offer discounts that only last as long as your initial contract term. For example, BT’s unlimited 52Mbps FTTC “fibre” service is currently priced at £29.99 per month on a 12 month contract but this returns to £47.49 once the term is over. Similarly Sky Broadband’s unlimited 17Mbps service is £18.99 per month on a similar contract but this later returns to £28.99.

Table 1: Changes to the combined cost of ADSL or fibre broadband plus line rental between 2011 and 2016, both in and out of contract:

Table 2: Increases to monthly line rental between 2011 and 2016, across the six biggest providers (paying via direct debit):

NOTE: BT and Sky Broadband have both since announced another raft of sharp line rental hikes (here and here).

Big ISPs aren’t stupid and they’ll be aware that, according to Ofcom’s figures, only around 10% of consumers switch providers every year and this suggests that many people are likely to remain with the same provider after their contract ends. Sometimes this is due to loyalty and satisfaction with the service, while other times people may be fearful of a switch due to the potential for downtime or other problems (here).

Competition has kept prices low and fuelled a heated market of discounts that are designed to tempt new customers. Naturally uSwitch.com suggests that the best way to take advantage of this is to keep switching, with the comparison giant claiming that broadband bill payers languishing on expired contracts are “overpaying” by £105.48 a year and fibre customers are missing out on average annual savings of £78.60.

In our view if you’re not a fan of frequent switching then it might be better to choose a reliable ISP that gives you a generally lower / more stable post-contract price, as opposed to choosing one that only offers a big discount for the first year or so. This is why we’re glad to see that most of the major ISPs now display their post-contract prices on packages and BT has recently followed suit, which makes it easier to compare.

Furthermore it’s worth remembering that cheaper services also result in less money being made available to reinvest in better and faster broadband infrastructure for the future, thus moaning about the price while at the same time complaining that UK broadband isn’t up to scratch could sometimes be seen as a contradiction.

At the end of the day ISPs know how to balance all of these factors in order to walk away with a profit, which is easier when you’re a big provider with economics of scale on your side. Similarly we must not forget that price rises can also have legitimate foundations too, such as the need to keep up with endless growth in end-user data consumption or to cater for new regulations etc.