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Broadband ISPs Face New Advertising Rules to Stop Misleading Prices

Thursday, January 21st, 2016 (12:01 am) - Score 1,726

A new joint study from Ofcom and the Advertising Standards Authority (ASA) has ruled that the current approach to broadband price advertising is “likely to mislead” and as a result UK ISPs will, from 30th May 2016, be forced to adapt their approach. But the new approach may create some problems of its own.

At present the current approach typically involves prices for several elements of the advertised offer being presented separately (e.g. broadband, introductory offers, router delivery charges, line rental, contract length, non-Direct Debit surcharges, vouchers, installation costs). Most ISPs also have to buy broadband and phone services separately from their suppliers.

As a result there are tons of smaller ISPs that sell broadband and phone services as separate, rather than bundled, products to consumers. For example, you could buy phone line from one provider and then get your broadband service from a different provider. Furthermore there are some pure fibre optic (FTTH/P) and cable providers that can sell true standalone broadband packages via a single fee, where there is no need to take a separate “phone” (line rental) service from the ISP.

On the other hand there are plenty of providers that also try to game the system, such as by hiding the cost of line rental in their small print or confusing potential customers via introductory discounts that fail to clarify how much you will pay once that discount period is over.

Highlights from the ASA UK Research

· 23% of participants correctly identified the total cost per month after the first viewing of an ad when asked simply to recall as much information as they could about the deal on offer without prompting. In response to the same question, 34% of the total sample recalled pricing information, but only provided partial information or an incorrect figure for the broadband service or line rental costs.

· 22% of participants, were still not able to identify correctly the total cost per month after the second viewing (If this proportion were reflected across the population of fixed broadband subscribers, this would mean around 4.3 million UK households being unable to figure out what they would be paying)

· 64% of those who couldn’t calculate the total cost per month, despite a second review, thought the headline price for the broadband element of a package constituted the total cost per month and that line rental costs did not apply

· 81% of the sample were not able to calculate correctly the total cost of a broadband contract when asked to do so.

· 74% of the total sample believed that information about one-off and on-going costs after an introductory period was either fairly or very unclear.

At this point it’s worth noting that only 300 participants took part in the above survey, which seems like an incredibly small sample size for such important research, especially if it’s going to be used as evidence for making a significant change to the industry. Never the less we’ve seen plenty of confusing offers in our time and thus it’s easy enough to agree with the ASA’s concern.

Guy Parker, ASA Chief Executive, said:

It’s essential we make sure people aren’t misled by pricing claims in broadband ads. That obviously wouldn’t be good for them, but nor would it benefit broadband providers, because advertising works better when it’s trusted. We’ll now be moving quickly, working alongside broadband providers, to clarify the presentation of price information.”

Sharon White, Ofcom Chief Executive, added:

Ofcom wants to see clear and accurate broadband prices for consumers. Our research with the ASA shows many people are confused by complicated adverts and offers, so we welcome the ASA’s plans to simplify broadband advertising.

Ofcom has already introduced measures to ensure customers receive accurate information on broadband speeds when they take out a contract. We’ll continue to work with industry and other regulators to ensure that broadband customers are treated fairly and have the best possible information to make the right choices.”

The New Approach

The ASA claims that they remain “open minded as to how pricing should be advertised so as not to mislead consumers,” although they have made the following suggestions to broadband ISPs. The final recommendation on advertised pricing is expected to be communicated to industry and the public before 30th May 2016 when it will need to be adopted.

ASA Suggestions to Broadband ISPs

· Advertise all-inclusive up-front and monthly costs; no more separating out line rental.

· Greater prominence for the contract length and any post-discount pricing.

· Greater prominence for up-front costs.

The only real contentious aspect of this is likely to be the recommendation for an “all-inclusive up-front” monthly cost, which seems to be another way of saying that ISPs should combine line rental and broadband into a single price.

On the surface we think this is a very good idea, but the issue is that it might not work for every ISP and different consumers may also attract different costs (e.g. some only need to pay a small migration fee when swapping service, but others have to pay for a new line installation; this could become hard to promote via a single cost in adverts).

A TalkTalk Spokesperson said:

TalkTalk absolutely supports the ASA’s findings and we’ve already called on Ofcom to bring in all-in pricing. It’s obvious that a single headline price is much clearer and better for customers, and we’re actually already doing it on a pilot project up in York.

But until the whole market moves to single prices, any company that advertises its products like this will struggle to compete with what look like better deals from other providers. We want Ofcom to be bold and tackle this problem in their strategic review and we would absolutely support them in doing so.”

Nicholas Lansman, Secretary General of ISPA, said:

ISPA welcomes the ASA research into how consumers engage with broadband adverts, but believe that more detailed research is needed to corroborate the survey findings. Price is only one factor when a consumer chooses a service and the engagement with an advert is only one part of a purchasing decision – we urge the ASA to consider the whole customer experience when consulting on changes to its advertising guidelines.

The UK has a highly competitive broadband market and informed and empowered consumers are an important part of this. This is supported by Ofcom’s own figures that show the UK benefits from some of the most competitive broadband pricing. Beyond adverts, ISPs provide clear information if consumers engage more closely with them, for example by going to their website, visiting a shop, working with comparison and consumer websites or by calling the providers. This has not been reflected in the survey which is based on a small sample size with some of the reviewed adverts only being shown to 8 participants.

We look forward to working together with our members and the ASA on how to empower and inform consumers, and it is worth emphasising that the adverts that were used in the survey fully comply with current guidelines.”

Naturally it should work for most of the big ISPs and packages just fine, although it’s unclear how they’d handle discounts like the pre-paid Line Rental Saver offers (big ISPs often offer a standard monthly line rental or a cheaper annual pre-paid discount). Likewise the hundreds of smaller ISPs that offer line rental and broadband as optional / separate services, rather than bundles, may be left to scratch their heads about the best approach.

Speaking as a site that also does basic price comparisons, this gives us a headache too because of the variety and depth of choice in the market. Our usual approach is just to make both the broadband and line rental costs, as well as any other charges, visible together (we also already do a single / combined price on our bundles list). But if ISPs are now forced to combine broadband and line rental then those providers that offer broadband, but which let you to choose your own line rental provider, could become more difficult to compare without a confusing two-tier approach.

As TalkTalk says, until the whole market moves to the same model then there is a risk of creating problems. On the other hand a single-price approach could become a very effective way of tackling the culture where ISPs attempt to conceal broadband price rises by passing the hikes onto phone line rental, but it might require further action from Ofcom in order to effect true change.

Otherwise there’s really no reason why ISPs cannot promote their pricing in a clearer way by being more transparent with what they’re doing / discounting. Similarly there is also nothing inherently complicated about line rental, so long as it’s presented and costed clearly alongside the broadband cost when applicable.

UPDATE 7:27am

Added a comment from Citizens Advice below.

Gillian Guy, Chief Executive of Citizens Advice, said:

Misleading broadband ads have been duping consumers for too long.

Burying the cost of line rental in the small print of adverts or not properly explaining the duration of a contract are blatant attempts to mislead people. It is confusing and makes it difficult for consumers to know how much they’ll be charged or to compare deals from across the market.

Our evidence shows some people are paying up to six-and-a-half times more for broadband than advertised, customers are being promised one thing, and charged for another.

It is good the Advertising Standards Authority has listened to consumers’ concerns. If the ASA can get broadband providers to advertise all-inclusive up-front costs and make contract lengths clear it will help consumers make informed choices.”

UPDATE 9:35am

Ofcom has published the full report, which can be downloaded here.

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By Mark Jackson
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 Twitter, , Facebook and Linkedin.
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16 Responses
  1. Steve Jones says:

    I’m not sure on what statistical basis three hundred (correctly chosen) people is considered to be too small a sample size. These aren’t subtle effects that are being reported. I would expect those who do these studies to be able to determine when a results is statistically significant or not.

    Of course the biggest nonsense for those offering “all-in” packages is the impression given that the line rental cost is largely down to the provision of a voice circuit when the actual voice bit (rather than the copper loop) is trivial. It’s an accident of history when, in the initial unbundling of ADSL, the regulatory authority (it might have been Oftel at the time) deliberately chose to dump the vast majority of the physical line cost onto the voice service provider.

    This misapprehension continues as any time there is mention of a service provider increasing retail line rental costs there are always those posting that they don’t need a voice line and why should they pay for it.

    1. Mark Jackson says:

      Have a look at the full report to see why, since that 300 is split up and in some cases the sample adverts were only looked at by 8 of those people. Now that doesn’t strike us as being enough data to give a proper reflection.

    2. Henry says:

      Yes – assuming a representative sample, the likely margin of error with a sample size of 300 is not far away from +/- 5%.

      So, for example, this might suggest around 15%-27% of the population would not be able to correctly identify the total cost per month even after a second viewing. For me, that would not be different in magnitude to saying 22% of the sample did not manage it.

    3. Steve Jones says:

      I’m assuming that the figures are testing ads in general and not any specific advertisement.

      In any event, taking a sample size of 300 and the smallest effect (the 22% who couldn’t work out the monthly cost after a second viewing), then putting the numbers through a sample size calculator I get around 22% +/- 5% at a 95% confidence level. Enough to show it’s causing confusion to a significant number, even after a second look.

      In any event, I’m not sure it’s the most important issue at stake which is surely to come up with a method that does allow for easier comparisons and misleading headlines (such as free broadband) where much of the cost has simply been loaded onto the line rental.

  2. wirelesspacman says:

    Well, if the ASA do win this battle, perhaps they could then move on to the one about ISPs claiming that copper/coax cables are actually made out of glass! 🙂

    I notice that the current Virgin Media advert (promoting their 200 Mbps product) literally refers to it as 200 Mbps “fibre optic”.

    1. Peter says:

      This one has been looked at by the ASA
      The complaint re FTTC being described as fibre optic was made by a group of very switched on individuals
      The ASA ruled against them.
      It was appealed to the independent adjudicator
      He ruled in the ASA’s favour
      You and others are wasting your time to discuss this one endlessly – the horse has bolted: until such time as a significant proportion of the UK has access to both FTTP and FTTC and as a result that there is a choice decision to be made.

    2. GNewton says:

      @Peter: Thank for the ASA link on the issue of fibre broadband usage.

      The main reasoning of ASA was this:

      “would primarily be concerned with the improved speed and performance which could be delivered in comparison to an ADSL connection, and the cost at which that service could be obtained”

      While this is correct, caving in to industry demands of promoting false terminologies for VDSL in favour of big companies like Virgin or BT will make it harder for genuine fibre-optic ISPs to market their products. Besides, VDSL hardly ever offer the advertised speeds, unlike fibre. I don’t know of any other country where the term “fibre broadband” is misused in such a prominent way as in the UK, correct me if I am wrong in this.

      At any case, this history makes ASA not a trustworthy organisation to be in charge of sorting out ISPs misleading price adverts, does it?

    3. wirelesspacman says:

      I’m with you on that one GNewton.

      When you read their justification it really makes you despair about how stupid those ASA muppets must be. After all, according to their justification normal ADSL broadband could be sold as “fibre optic” – heck even dial up broadband could be!

    4. Wise Old Owl says:

      ISP’s aren’t – ‘An ISP’ is however, and you rightly pointed them out.
      Sadly the world Wide Web contains World Wide People many of whom couldn’t care less how VM pitch their service but Ofcom/ASA should be focusing in on these larger providers and stop this continual barrage of confusion for the consumer. How long has this been going on for? Forever it seems.

  3. dragoneast says:

    Pots and kettles (and the usual sidetracking of discussions about stats).

    It seems to be that the confusion arises from the way Ofcom regulates the industry, and and that they aren’t willing to be honest with consumers about it. Ofcom, out of everybody, least want the public to understand!

  4. GNewton says:

    I am not sure if ASA if up to the task on this.

    E.g. they claim that “It’s essential we make sure people aren’t misled by pricing claims in broadband ads.”

    Yet most ISPs, with full ASA blessings, do misleading “fibre broadband” adverts, when in fact their products refer to VDSL. How is a pure fibre-optic ISP supposed to advertise his product then? So it’s not just the confusing price packages often promoted by ISPs, it’s also the misleading or poor product description itself which needs to be addressed, too. How is pure fibre-optic ISP to compete with another’s “free fibre broadband”? Perhaps the wireless ISPs can now market their product as “air fibre”?

  5. Kits says:

    I persoanlly think they have got it wrong not everyone wants all their services from one supplier. The advertising should be the line rental is seperate the big ISPs use the bundled way to hide their excessive line rental charges. ASA are helping them not the public also the biggest problem is many selectively read so miss the important information even though it is there. The only way to make this fair is to have line rental quoted at the start even bundled packages should be made to say exactly what they are charging as line rental.

    1. dragoneast says:

      I’d go further. Rather as local government specifies its precepts, I’d specifically set out the standard Ofcom prescribed BT charges for the line, with a prescribed note setting out what that covers (which’d deal with the “line rental” issue) – in standard form as it’s all prescribed by Ofcom.

      Then the ISP should set out their charges, both fixed and variable, for any interim period (where applicable) and therafter with the period to which they relate, and separately (where appropriate) for both voice and broadband services. It’d be bland, but that is what you expect for a utility.

      But I suspect none of this is about clarity for the consumer, but more for PR purposes.

    2. Chris Phillips says:

      it should be made clear if BB is free with any line provider, so free sky BB should still be free even if you have Talk Talk as the line provider. that’ll stop most of the shenanigans. They should also split the voice charges from line rental to make it clear that the line rental is still necessary even though you do not make voice calls.

    3. GNewton says:

      @Chris Phillips: Totally agree.

      A simple breakdown into

      line rental charge,
      voice package charge,
      call charges,
      DSL charge, etc,

      right under the advertised Total should do the job. The end customer could then instantly see that the so-called “free broadband” isn’t free after all.

      You’d think common sense would have caused ASA or Ofcom to enforce it ages ago. Instead they let the ISPs deceive end customers. ASA in particular doesn’t appear to be trustworthy in doing its job.

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