Brace for HUGE UK Broadband and Mobile Price Hikes in 2022

The surge in UK inflation is threatening to result in one of the biggest annual price hikes in broadband ISP, phone, mobile and calling charges seen in years, which could hit customers of BT, EE, Plusnet, Vodafone, O2, TalkTalk, Shell Energy, KCOM and others with rises of around 9% come March-April 2022 (double the usual level).

Annual price hikes are of course nothing new in this market, as well as many others. Often there are legitimate reasons for prices to go up, not least because ISPs are frequently adding all sorts of new services (e.g. FTTP), developing new systems, facing higher charges from suppliers, implementing costly new Ofcom rules and consumers are also gobbling significantly more data every year.

In short, service improvements and catering for rising demand can be an expensive challenge, which means that, ultimately, customers will often end up paying more. But how communications providers account for this can vary like the wind, with related contract terms often appearing to change more frequently than the dishevelled locks of Boris Johnson’s hair.

For example, over the past couple of years’ all of the aforementioned providers have linked future price increases to the rate of inflation – Consumer Price Index (CPI) – each year. As a result, nearly all of the named providers typically inform customers that they will increase prices by a set rate of 3.9% (3.7% on TalkTalk and ‘up to’ 3% on Shell Energy) + the CPI rate of inflation as published in January each year (February for O2).

One catch with this approach is the fact that new or upgrading customers will now be aware of any future increases when they join, which is good but makes it harder to take advantage of Ofcom’s rule against mid-contract price hikes (GC1.6). This applies when an increase constitutes a “material detriment” to your service, such as those that go above the level of inflation (i.e. granting you the option to exit an existing contract penalty free).

In addition, most providers also adopt double standards with their x% + CPI approach. In other words, they’re happy to pass on any increases in CPI or RPI to their customers, but if inflation ever went negative then none of them would pass those savings on to consumers (i.e. they’d just charge the x% figure without the CPI/RPI change).

The 2022 Inflation Nightmare

Last year, the aforementioned approach of inflationary linked price hikes saw related broadband and mobile operators increasing their prices by around 3.9% + CPI of 0.6% (i.e. a total annual increase of 4.5%) during the spring, which wasn’t all that different from the old model of static annual increases – this tended to result in annual hikes of 4-6% (usually notified to customers 1 month before implementation).

However, since January 2021, there has been a dramatic and sustained surge in inflation. This has been largely driven by rising fuel and energy costs, as well as the wider supply and demand issues that have pushed up prices in other areas. The latter was also impacted by the higher cost of post-Brexit trade and a rapid post-COVID19 return to normal economic activity etc.

As can be seen above, the CPI figure for October 2021 (as published in November) hit 4.2% (RPI hit 6%) and some reports indicate that it could peak at around 5%. The forecast suggests that CPI will continue on this trend for at least the next few months, which means that the rate due to be published next month – the one most ISPs will use to set their price hikes against – isn’t likely to be dramatically lower than c.4% (vs just 0.6% last year).

In other words, most of the aforementioned providers currently look set to introduce a dramatic annual price hike of around 8% and probably more, which is roughly double last year’s total increase of c.4.5%. Admittedly, such a high degree of inflation will be adding extra costs for ISPs too, but there’s no escaping that consumers are definitely going to feel the impact of this on their bills next year.

Customers of O2, which uses the slightly different 3.9% + RPI model, may face an even more dramatic rise if RPI continues to increase beyond 6%. Meanwhile, Sky Broadband (Sky Mobile), Virgin Media and Three UK currently still seem to be adopting the old method of static annual price increases (e.g. Three UK has already informed customers that their prices will rise by 4.5% in April 2022).

Ofcom is unlikely to help here because their Fairness Commitments, which are supported by most of the major broadband and mobile providers, merely requires signatories to “offer customers packages that … have a fair approach to pricing” and ensure “prices are clear and easy to understand.” But the language is ambiguous and doesn’t specifically tackle price hikes, as well as being more aimed at “vulnerable” users.

Alternatively, customers could try contacting their ISP directly and haggling for a lower price when a hike hits (Retentions – Tips for Cutting Your Broadband Bill), although your mileage may vary. Likewise, there are still some providers around, often smaller players, that don’t play the annual price hikes game or which are much more transparent with their policies.

Last year we conducted a snap poll with 300 of our readers, which questioned what approach to annual price increases they’d begrudgingly favour. Most respondents (54%) voted for a set rise by c.4-6% each year, provided it was clearly stated in the contract. By comparison, only 30% were happy with the old approach of surprise annual hikes (could be 2% to 6%+, you never know until the ISP announces it) and just 16% liked the current x% + CPI method.