Big UK ISPs Accused of Overcharging Customers by up to £236

A new study from Is My Bill Fair has resulted in the organisation claiming that existing customers of major broadband ISPs – including EE, BT, Virgin Media Plusnet, TalkTalk and Sky Broadband – are being “overcharged” between £91.20 and up to £235.56 per year as a result of the so-called “loyalty penalty.”

The use of the word “overcharge” is perhaps a bit misleading since we’re NOT talking about billing mistakes. Instead this largely reflects the difference between initial discounts and post-contract pricing. The practice of offering discounts on new subscriptions exists across nearly all service sectors and is by no means unique to broadband.

In practice what this means is that the biggest ISPs tend to offer a reduced price for the first 12-24 months of a contract term in order to attract new customers, but after this the price will inevitably rise. Such discounts and special offers are fairly normal for any aggressively competitive service market, although not all ISPs are clear enough about how much you’ll pay post-contract.

For example, with a cursory check we can see that neither Sky Broadband, Plusnet, EE nor TalkTalk currently put their post-contract pricing alongside their main packages (to see it you often have to hunt through the small print or run through an order process first), while BT and Virgin Media both do a good job of putting such detail front and centre.

In order to illuminate the average cost impact of all this Is My Bill Fair processed bill data from 100,000 customers who had visited their broadband category over the past 6 months and then compared how much existing customers were paying with that of new customers, for each provider and each specific package.

In our view such discounting shouldn’t really be a concern, provided the ISPs make their post-contract prices completely clear; ideally right alongside the discounts. Equally it’s important to highlight that not all ISPs adopt the same model and many smaller providers, which may offer advanced features (static IP etc.) and better quality, simply charge a set monthly fee that rarely changes.

A few ISPs also offer an alternative approach by enabling existing customers to re-contract at a lower price point than their standard rate and alternatively a bit of haggling could save you a lot of money (see our Retentions Tips article), although only about 10% of consumers seem to do this. If you’re happy with a provider then negotiation should be your first port of call, although it may only work on a big ISP where discounts are common.

Ofcom has already moved to tackle this problem by introducing a new end-of-contract notification system from 15th February 2019 (details) and they’ve also encouraged the biggest providers to support their recent Fairness for Customers commitment, as well as related proposals for a new Fairness Framework.

On top of that the regulator has this week also extracted some related pricing commitments from the biggest broadband providers, although a few of the key changes won’t start until March or mid-2020 (here). The focus of this is also largely upon vulnerable consumers who may not switch and can remain stuck on expensive legacy packages for years.