Tesco Mobile Seeks BAN on Broadband and Mobile Price Hikes

The UK mobile division of Supermarket giant Tesco and charity Money Advice Plus have today jointly called for a “ban on price hikes” by broadband ISPs and mobile operators, although in the context they appear to be focusing on “misleading” mid-contract price rises rather than all price hikes.

The position is being supported by the results of a new Tesco-commissioned YouGov survey into unexpected price hikes, which interviewed (online) 2,058 UK adults between 26th and 28th of February 2021. The results found that 9% of respondents have been unable to pay essential bills since the COVID-19 pandemic began, while 38% admit even a small increase to household or utility bills would cause them to worry financially and 14% fear it could cause them to face potential disconnection because of arrears.

At the same time Tesco Mobile notes that a growing number of mobile and broadband operators have recently announced a raft of “unexpectedly high mid-contract price rises this year,” which have reached as high as 4.5% for Three UK, Vodafone, BT and EE customers. In fairness though, such things have long since morphed into somewhat of an annual event, so for anybody paying attention they shouldn’t be totally “unexpected.”

Summary of Additional Survey Results

— 42% believe their phone has become more essential to them during the pandemic.

— 50% of those with a mobile phone contract weren’t even aware a network provider could put up their prices mid-contract and part of that may be due to unfamiliar jargon (see below).

— 48% don’t understand the term RPI (Retail Price Index), while 69% are unaware of what CPI (Consumer Price Index) means – both are different types of inflation.

Inflation is a measure of the rate of rising prices of goods and services in an economy (e.g. if something costs more to produce, then the end product to consumers may also cost more). Mobile operators have long linked annual price rises to changes in the level of inflation, although this same trend has recently also spread to some of the largest home broadband ISPs too (usually inflation plus an additional %).

In any case, Tesco Mobile is calling on other networks to “reverse prices hikes this year” and join them in promising to keep prices frozen throughout the duration of their customers’ contracts. On this point the operator has somewhat of a vested marketing interest, since they already offer capped contracts as standard and include a Tariff Promise – guaranteeing no mid-contract price rises due to RPI.

Tom Denyard, Tesco Mobile CEO, said:

“Beyond being misleading, our research has shown that mid-contract price rises in our industry will have a financial impact on those who have already been hit hard. There could not be a worse time for networks to implement their biggest price rises. For a family of mobile users, the increased costs mean less items in the weekly shopping basket or additional pressure to pay a bill that was higher than expected.

Telecoms companies have never played a more important role in people’s lives. During one of the most uncertain financial times on record, and at a time of physical isolation, this is not a time to be making a phone harder for someone to afford. That’s why we are calling on other networks to reverse price rises this year.”

At the same time as this, providers are frequently adding all sorts of new services, running big first year discounts, adapting to new rules (e.g. automatic compensation) and developing new systems (e.g. improved switching). On top of that consumers are also gobbling significantly more data and COVID-19 has resulted in many operators offering special discounts, billing flexibility or additional content to customers. All of these things add costs.

The difficult thing for operators is that they still have to find some way of balancing their books, so if a price rise is delayed in one year then they may need to put up more prices elsewhere, or introduce a bigger rise in the following year, to compensate for that loss.

On the other hand, short of a major economic shock, there’s arguably no reason why mid-contract hikes should have to be the norm (package pricing could be pre-planned around the need for future rises) and smaller providers often manage to avoid doing them at all. In any case we suspect that Tesco’s position will fall on deaf ears at the largest operators. Only Ofcom’s position, or political pressure, will have any real impact.