Gov Push Ofcom to Tackle Mid Contract UK Broadband and Mobile Price Hikes
The Secretary of State for Science, Innovation and Technology (DSIT), Liz Kendall, has now joined the chorus of displeasure at O2’s recent decision (here) to increase their annual mid-contract price rises beyond what customers agreed when they signed-up. In response, the minister has directed Ofcom’s CEO, Dame Melanie Dawes, to “look at in-contract price rises again“.
At the start of 2025 the industry regulator began requiring telecoms providers to adopt a new approach to mid-contract price hikes, which did away with the confusing percentage and inflation-based model (i.e. ISPs promoted mid-contract increases as CPI + 3.8% or similar) – replacing it with one that must now set out such price rises “clearly and up-front, in pounds and pence, when a customer signs up” (here). This made annual price hikes clearer and more transparent, but not necessarily cheaper.
In response, many providers later followed BT’s lead by setting out a new pricing policy that would increase the monthly price that customers pay by a flat £3 extra – effective from March or April each year (the level of increase can vary a bit between providers). But inflation has remained higher than originally anticipated and, partly as a result of that, BT recently announced that they would increase their annual hikes by an extra pound to £4.
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Other providers have since started to follow by BT’s lead, but what really seems to have caught everyone’s attention was O2’s decision to go a step further by applying this to existing customers too (i.e. those who had signed-up via the previous policy). In fairness, O2 did allow customers impacted by this to exit their contract penalty free, which Ofcom acknowledged when expressing their own somewhat weak “disappointment” at the change last week (here).
An O2 spokesperson said:
“As acknowledged by Ofcom in its letter to providers last week, its rules do not prevent companies from increasing annual price changes – for example, to invest in improving networks for customers. A price increase equivalent to 8p per day is greatly outweighed by the £700m we invest each year into our mobile network, with UK consumers benefitting from an extremely competitive market and some of the lowest prices compared to international peers.
We appreciate that price changes are never welcome, but we have been fully transparent with our customers about this change, writing directly to them and providing the right to exit without penalty if they wish.”
However, the regulator also pointed out that O2’s approach goes against the “spirit” of their change, not least by ruining price transparency for consumers (i.e. we’re back to not being able to trust that ISPs won’t change the rules on us mid-flight). But Ofcom failed to address the fact that the policies being adopted by most providers have a nasty tendency to unfairly penalise those on cheaper packages (the same increase is applied, regardless of how much your monthly package costs).
The Government’s Turn
The government have clearly been keeping an eye on all this, which last night resulted in Liz Kendall (MP), Secretary of State for DSIT, publishing a new Open Letter that directs Ofcom’s boss to “look at in-contract price rises again“. The letter also made several key recommendations and suggestions for the regulator (the letter is fairly short, so we’ll publish it in full first):
Liz Kendall’s Key Recommendations for Ofcom
1. Look at in-contract price rises again.
2. Undertake a “rapid review” on how easy it is for customers to switch providers.
3. Deliver increased transparency in telecoms bills, which could follow the same mould as “recent changes on electricity bills” to help highlight the costs of specific components of those bills.
4. Consider the possibility of adopting a similar regime to those such as insurance, where new and existing customers need to be offered the same deal.
Liz Kendall’s Open Letter to Ofcom
Dear Dame Melanie,
As we discussed when we met earlier this month, driving down inflationary costs and protecting consumers are vitally important for this government.
As such, I welcome both the action you took in January to increase transparency on how in-contract prices are presented in new contracts, and your statement yesterday expressing disappointment with O2’s price rises. I strongly agree they are against the spirit of your previous changes on pricing, and all the more disappointing given the current pressures on consumers.
Nevertheless, I believe we need to go further, faster. I am keen that we look at in-contract price rises again. O2’s recent decision to increase prices above the levels specified in the contract means that, under Ofcom’s rules, its customers can leave free of charge within 30 days. I would welcome your undertaking a rapid review on how easy it is for customers to switch providers – if companies are determined to increase pricing, it is beholden on us to make sure that customers are able to go elsewhere as easily as possible.
Similarly, I believe that, as with recent changes on electricity bills – which provide for greater transparency about the costs of specific components of those bills – increased transparency in telecoms bills could be a helpful mechanism to drive further clarity on pricing and investment. I would welcome views on how best to achieve that.
In addition, recognising that there is a decreasing number of people on legacy contracts but in an effort to take all action possible, would you write to telecoms companies to ask them to clearly and urgently communicate to customers with pre-January 2025 contracts, to ensure that those people are appropriately informed of their upcoming price rises. I would also welcome your assessment of the impact of the January changes to help us all identify where further transparency measures might be merited.
Finally, you will be aware that there have been calls for the sector to have a similar regime to those such as insurance, where new and existing customers need to be offered the same deal. So, for example, when an existing customer looks to renew their contract with their provider, they are provided with the price they would be charged if they were a new customer and have a choice over which deal to take. I understand Ofcom developed a discussion paper on this in 2023, and I would urge you to look at this as soon as possible.
I know you will agree that it is imperative that ordinary people feel empowered when interacting with the telecoms market, and that they can be confident they are getting a fair deal. So, given the importance of this agenda, I would be grateful if I could have a response by November 7th. My officials stand ready to discuss next week if helpful. I am, of course, very open if you have other suggestions in this space.
Yours sincerely
The Rt Hon Liz Kendall MP
Secretary of State for Science, Innovation and Technology
In fairness to Ofcom, switching between telecoms providers has been made significantly quicker and easier in recent years thanks to systems like One Touch Switching (OTS) on broadband + landline phone and Text-to-Switch (Auto-Switch) on mobile. Likewise, we’re all for more transparency on telecoms bills, although this specific area hasn’t really caused too many complaints.
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The key suggestion above seems to be where Kendall calls on Ofcom to consider the possibility of adopting a similar regime to those such as insurance, where new and existing customers need to be offered the same deal. Leaving aside the fact that these are two VERY different markets, there’s a risk that such an approach might choke-off the ability of providers to attract new customers via discounts, which might also reduce switching and thus risk raising prices.
In the above scenario, we continue to think it might be better to simply ban the practice of mid-contract price hikes, which wouldn’t stop ISPs from discounting the price across your first contract term. But even this approach does run into the potential for similar caveats, since some offers (e.g. 3-6 months free service on a 24-month term) might also be choked off. But we dare say that consumers would find general price reductions for the first term to still be both easier to understand and much easier to advertise, as well as to compare between providers. Convoluted discounts are a headache when it comes to service comparisons.
The law of unintended consequences remains a tricky one to balance, but it’s becoming increasingly clear that Ofcom’s last attempt at a halfway house style solution has not worked as well as they would have hoped. Instead, consumers who can least afford it (i.e. those on cheaper packages) are being hit by the biggest hikes and transparency is also being wrecked by providers changing the rules mid-flight. We await Ofcom’s solution with great interest.
However, any solution will still have to recognise that network operators often do still have to increase prices due to costs rising in other areas, such as for service provision, regulation, energy and the need to invest in new network upgrades. At the same time, the level of inflation has remained much higher than it was previously forecast to be, which changes the risk and cost assessment that each provider has to make.
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Mark is a professional technology writer, IT consultant and computer engineer from Dorset (England), he also founded ISPreview in 1999 and enjoys analysing the latest telecoms and broadband developments. Find me on X (Twitter), Mastodon, Facebook, BlueSky, Threads.net and Linkedin.
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If you can get a mortgage fixed for up to 10 years then the networks can offer a monthly price of X per month for two years. All they need to do is work out the cost in April 2026 and April 2027 and then calculate the average monthly cost, it’s that easy. The current practice relies on consumers being drawn into the headline, lower initial rate, which will only be available for 5 months of the deal.
Yeah and they are already doing it by having fixed price increases. The total cost of the contract is known at the start. So whether you pay 24 equal payments or 12 payments at one price and another 12 at a higher price makes no difference to the total amount paid. What should not be allowed is for the ISP to bail out of the contract if they miscalculate as O2 have done. That practice should be banned. The customer does not have that privilege if they realise they could get a better deal elsewhere mid-contract.
“There’s a risk that such an approach might choke-off the ability of providers to attract new customers via discounts”. Well Boo Hoo Hoo, it’s absolutely ridiculous that you have to change providers every 2 years to get the best prices & loyal customers get penalised for not changing, not to mention the fact that likes of BT, VMO2 & Sky tend to bundle other services (TV etc) which makes it even more complicated for customers, a situation which I have just extricated myself from. Likewise in contract price rises should be banned outright with no escape clause for the companies, there’s no escape clause for you if you want to terminate early they expect you to cough up the rest of your contract.
Just to clarify, I’m not saying that ISPs can’t offer discounts but there should be a single price list on the day which applies to both new and re-contracting customers automatically.
Time to ban long contracts, 18 months is bad enough, but 24 months is worse. They say they do so to give us the best prices, not they do so to lock us in and use wording in contracts saying that the price will rise twice in that time.
I looked at one stream before I changed to the altnet and also, Now broadband, at the time they still did 12-month contracts and FTTC. Plusnet, just would not budge on 24 months.
If they can do 12-month contracts, so should others., okay, so set up costs have to be paid, £14 for onestream, but some people prefer that.
Switching isn’t always a realistic solution. There are a lot of areas where there is a monopoly high speed provider, eg Virgin Media cable or a vertically integrated FTTP Altnet, and the only alternative is a very low speed Open Reach DSL connection. After many years being stuck in such a situation and at receiving end of endless boiling frog price rises City Fibre FTTP came along. The ISP I use via CF hasn’t raised prices in three years, in fact this year the price has gone down. Perhaps the high speed monopoly areas should be regulated as monopolies?
I wonder what butchered scheme Ofcom, the unelected quango, will come up with this time?
Just because the government made a request, doesn’t mean it won’t be affected by the mangling machine.
Or perhaps this is 3rd time lucky this time and they get it right????!!!!
I hope Liz Kendall also sent a letter to the Advertising Standards Authority, who are just as deserving of a wake-up call if not more so.
The Ofcom regulations and ASA/CAP guidance include examples of how contracts with price rises should be presented. In their examples, the price in later years is very prominent so no-one could miss it.
Yet to pick one example of many, the home page of talktalk.co.uk has several examples where prices after April 2026 (the majority of the contract term) aren’t just a bit smaller than the initial headline price, they’re about a third of the size. Using a much smaller font is not compliant with the spirit of the ASA/BCAP guidance or the Ofcom regulations. The ASA already has the power to tell them to stop advertising this way, just get on with it.
There is no need to mess around. A monthly price and service needs to stay the same for the duration of the contract, in the same way a customer is expected to pay each month for the duration of the contract regardless of their own circumstances. If providers feel that doing this over the course of 24 months leaves them too exposed, then they are free to fall back to 12 month contract terms, or even monthly rolling.
Mid-contract price rises should be outright banned. If an ISP doesn’t like the fixed price for a long time, they are welcome to offer shorter contracts, or even monthly rolling, and then they can manipulate the price as much as they wanted.
Fingers crossed this gets a bit of publicity, and other ISPs can thank VMO2 for drawing attention to it. They should just ban in-contract price rises, outright. Contract isn’t worth anything if you can just change core aspects of it once entered.
We’ll get shorter contracts because they seem incapable of being able to forecast, and the market will drive the price down even if the price goes up in the short term.
At least this gives them the chance to actually make it consumer-friendly, rather than trying to appease network providers.
Minimum commitments need to bind both parties. If a customer wanted to pay less but was within their minimum commitment, they would likely get stung with a hefty early termination fee. The same needs to apply in the opposite situation — if a supplier wants to be paid more within the minimum commitment, they should be obliged to pay an early termination fee of some description (I’m not sure how it would be calculated, but I’d suggest that perhaps it should be the total payments that the supplier would’ve been paid through to the end of the commitment period).
I’m sure there will be some Class Action activities brewing on this one.
A contract is a contract. Agree a price and that’s the end of it for that term. Anything beyond that is swinging the balance in favour of one party unfairly.
Call this a pipe dream, but I’m hoping this ends up being the straw that breaks the Camel’s back and they just ban the practice.
This is the simplest thing to solve: if an operator wants to increase its contracted price then the customer should be free to leave without a penalty
Just spoken to my altnet ISP Quickline as I’m out of contract to get on a black Friday deal at £17/month cheaper (£408 over a 24 month contract) just to be told “for new customers only”. Disgusting as currently they are the only full fibre provider in my area.
Hopefully this review will put an end to this shameful practise.
That’s a different issue.
Ok, so you could have a dirt cheap 12 month contract but then you pay for everything. Pay for the router. Pay for non-fault engineer faults. Pay for customer services every time you phone up because you couldn’t be bothered to do it yourself online….
Or you pay more to have an all-inclusive package, with the cost having to be spread out over 24 months, with a price rise or two to make the monthly average at a level where the ISP doesn’t basically give it away. ARPUs have barely shifted over the last decade but speeds and usage are at previously unimaginable levels.
You’ve got to chose. The home broadband industry is on the bones of its posterior and people still want more without paying for it.
Choose.
What you are saying is unrelated to the original issue.
You can have an “a’la carte” package, where you pick, choose and pay separately for everything, you can have an all inclusive package, but you can still guarantee the price for the fixed contract.
> ARPUs have barely shifted over the last decade but speeds and usage are at previously unimaginable levels
Again, unrelated, but true. But everyone is using this argument to imply we should pay more forgets how much cheaper transferring a bit became. When I started with dialup, I managed to download a whole gigabyte in whole month when I didn’t do anything just sat in front of my computer all month. How many seconds would it take today to download the same amount of data? (We could compare capital cost/Mbps, kWh/Mbps, etc, the result would be similar.)
I find it somewhat confusing that Vodafone need to increase the price of my main SIM every year, but Voxi (my backup SIM) has never increased in the 4 years I’ve been with them.
I will never ever trust this vile Liz Kendall. She won’t do it anything much different.