CEO of Broadband ISP Grain Pens Open Letter to UK Gov Over “Shameful” Price Hikes

The CEO of Carlisle-based altnet broadband ISP Grain, Richard Cameron, has written a new open letter to Liz Kendall MP, the UK Government’s Secretary of State for Science, Innovation and Technology, in order to highlight the “shameful” price hike practices of their rivals, which he says will not be resolved by the new Telecoms Consumer Charter.

Just to recap. The Government announced the new charter last week, which succeeded in getting the major UK broadband and phone providers to make a commitment to “stop unexpected bill increases“ (see our summary). But it didn’t do anything to stop mid-contract price hikes themselves and nor did it address the unfairness of how mid-contract price hikes are currently being applied (e.g. applying the same flat c.£2-£4 monthly increase to those who pay just c.£20 a month and those who pay c.£100 – disproportionately targeting those least able to afford it).

The view of Grain’s CEO is that the new charter is merely a smokescreen to distract people from seeing what is really going on in the industry, which he suggests has become an excuse to dramatically increase prices far above what they would have been under the old regime (admittedly this does vary, depending upon how much you pay for your service today).

We suspect that many consumers reading Richard’s letter will agree with the broad thrust of his thoughts. But admittedly this could also be seen as a cunning bit of promotional advertising by Grain itself, which has long pledged not to apply mid-contract price rises on their broadband packages (vested interest). Sadly, we suspect it’ll take more than one letter from Grain to evolve either Ofcom or the Government’s thought process.

Dear Secretary of State,

I am writing to you following the recent announcement regarding legacy broadband providers signing up for the government’s new Telecoms Consumer Charter.

I believe it is important to share how this Charter allows legacy providers to treat their customers. Transparency shines a light on what is happening today, and it is shining a light on shameful practices.

Legacy providers are being allowed to use this as an opportunity to inflict substantially higher price rises on their customers. Providers such as BT and Virgin Media are pushing the phrase “pounds and pence” price rises, moving away from the previous approach linked to inflation. Yet the term is wholly misleading, with the legacy providers using this change as an excuse to push through inflation-busting rises. It is also misleading to call them “mid-contract” price increases, which implies a single rise in the middle of the contract, rather than multiple in-contract increases. Consumers on 24-month contracts are frequently subject to two such increases during their minimum term, without the ability to exit penalty-free. This practice is now permeating throughout the industry, with other providers following suit.

Inflation busting in-contract price increases are now being applied by the following companies, meaning millions of consumers are being forced to pay more than they should be for their broadband services: BT, EE, Plusnet, Virgin Media, KCOM, Sky Broadband, NOW broadband, Vodafone, TalkTalk, 4th Utility, CommunityFibre, Cuckoo, Hyperoptic and Rise Fibre.

The Charter states that this will be the last year of CPI-linked price rises and implies this is beneficial for consumers. However, in practice, the new approach appears to allow legacy providers to impose significantly higher price rises on consumers, despite the increased transparency the Charter promotes. For example, I have included at the bottom of this letter a recent email sent by BT to a customer.

Under the previous approach, price rises were CPI plus 3.9%. BT is using the new approach to put through an excessive CPI plus 20%. This is not in the interests of working people who are struggling with the cost of living.

While it is not unreasonable for companies to protect themselves against increased inflation over time, contracts to consumers are capped at 24 months, and there is no reason why companies cannot be transparent and give a fixed-price contract for that time. This ensures that whenever prices are increased, consumers are treated fairly and have an opportunity to leave their contract without high penalty fees. As such, there is simply no need for inflation-busting in-contract price increases.

I have also included screenshots from the websites of broadband providers Rise Fibre and 4th Utility, which gives another example of a lack of transparency in the industry. These examples show significant differences between prominently advertised headline prices and what consumers are contractually required to pay.

This is inconsistent with guidance from the Advertising Standards Authority (ASA), which states advertising must either show the cumulative price the consumer will have to pay over the entire minimum length of the contract or the total price that the consumer will have to pay for each period of the contract, alongside a prominent statement of the number of periods the consumer is committed to pay that price for. The government could help consumers by asking the ASA to review website advertising in the industry to stop misleading claims, such as these, being made.

Finally, I am dismayed at how the rises are being communicated as necessary. For example, BT has claimed that the rises are vital to “continue giving you the connection and reliability you expect”. Connectivity and reliability are fundamental parts of a contract and should not be contingent on inflation-busting in-contract price increases that customers cannot avoid without penalty.

The only conclusion is that these increases are being used to generate excessive profits, and I believe this practice should be banned. I urge the government to act now to protect working people from being exploited by inflation-busting in-contract price increases and reconsider your support for allowing them to remain in place.

I look forward to seeing action taken to address this exploitation.

Yours sincerely
Richard Cameron
CEO, Grain Connect

As above, Richard includes a reference at the bottom of his letter to a recent email sent by BT to a customer, which highlights how it wasn’t only the flat £4 broadband price hike that will be hitting customers mid-contract. BT, claims Richard, “has also taken the opportunity to add an extra £3 for a Pay as You Go Calling Plan … The customer has never asked for this, or used it, but it has apparently always been bundled into the product for free. This new approach has been cleverly designed to allow price increases of £7 a month to be applied to the broadband service” (hence the 20% above inflation remark above).