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Hyperoptic Asks Ofcom UK to Probe Broadband ISP Price Hikes UPDATE

Monday, April 11th, 2022 (10:24 am) - Score 5,376
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Full fibre broadband ISP Hyperoptic has today formally called on the UK telecoms regulator, Ofcom, to investigate the use of above-inflation mid-contract price rises and to consider reform that would allow impacted customers to terminate their agreement and switch providers, penalty-free.

Annual price hikes are of course nothing new in this and other markets. 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, paying extra for their electricity and consumers are gobbling significantly more data every year.

NOTE: Hyperoptic is currently working to extend their “full fibre” (FTTP/B) network to cover 2 million UK premises by the end of 2023 (currently at 810,000).

However, one of the most irritating trends tends to occur – primarily amongst the market’s biggest providers (here) – when ISPs hike their prices in the middle of your contract. Ofcom has a useful rule to help protect against such hikes, such as if they rise above the level of inflation and thus enable consumers to exit their contract penalty free.

Sadly, ISPs have found a way around this rule by introducing a new CPI (inflation) + X% hike into the terms of their packages (e.g. on BT this works out as 5.4% CPI + 3.9% = a 9.3% average price rise). On the upside, this gives consumers some indication of how much their prices will increase in the future, but it can also remove the protection of Ofcom’s mid-contract hikes rule because you’re made aware of the hike when you sign-up.

The current surge in inflation hasn’t exactly helped matters, causing many consumers to question whether the CPI + X% model is the right one. According to Hyperoptic’s own “nationally representative” survey of 2,000+ consumers, some 60% of respondents stated that they were not aware that the price of their broadband would increase during their contract, while 47% felt misled by their ISP and 48% would not have signed their contract if they had been aware.

NOTE: Ofcom’s General Condition C1 (1.14-1.17) rule requires that any price variation clause must be sufficiently prominent and transparent at the time of purchase, so that the customer can be informed of their contract working in this way. To be fair, quite a few ISPs do state their CPI + X% rule on the product pages, but you often have to scroll down to see it in smaller print.

James Fredrickson, Hyperoptic’s Director of Policy and Regulatory Affairs, said:

“Households are already hurting from inflationary pressure on core products like food, petrol and energy. It is then startling to see that the majority of broadband customers are unaware of being locked into price rises of this scale.

It is imperative that Ofcom, as our industry regulator, urgently investigates industry compliance with the rules governing price variation clauses. As part of that, Ofcom should also consider making these price increases far more visible to customers – with a view to ultimately giving them the right to leave their agreement without charge should they feel that they could get a better deal elsewhere.”

Naturally, Hyperoptic are engaging in some clever marketing that also helps to promote their own – more positive – history on broadband pricing, albeit on the back of a serious and relevant point. But last year we also questioned whether it was time for a change in how the market handles price hikes (here), which in a snap poll found that most (54%) would favour a set rise of c.4-6% each year, as opposed to the CPI + X% method or surprise hikes.

Hyperoptic has also launched a petition that calls for freedom for consumers to switch broadband providers – penalty-free – whenever they are faced with an unfair price hike. It will be sharing these signatures with Ofcom as evidence of consumer sentiment: https://www.hyperoptic.com/free-to-switch.

The situation will be a difficult subject for Ofcom to balance, as they do also have to recognise some realities of the competitive marketplace, while at the same time needing to protect consumers from harm. But we suspect it might take more than just a letter and anecdotal survey from Hyperoptic to change the current rules.

UPDATE 12:57pm

We’ve had a comment from Ofcom.

An Ofcom Spokesperson said:

“Under our rules, providers must set out price rises clearly before customers sign up, and cannot just include them in the small print. If there is evidence that a provider failed to do this, customers can complain to them and then escalate to an independent ombudsman. We’ve strengthened our rules, so from June customers will also get a summary of the main terms of their contract in writing before they sign up, including an example of how any planned inflation increases will affect the price they pay.”

The change mentioned by the regulator above is due to be introduced on 17th June 2022.

Leave a Comment
25 Responses
  1. truthsayer says:

    If a company can freely hike their price during a contract, then the customer should be free to exit the same contract. The customer having to eat up the price increase without a way of punishing the awful business practice is fundamentally anti free market

    1. Neil says:

      The operators doing this will likely claim that they are not “free to hike their prices” mid contract. Instead, they are likely to say that they and the customer are entering into a contract with two distinct prices: one price until [1 April] each year, and then another, higher, price, from then on. In other words, they are billing the customer in line with the pricing agreed with them.

    2. Mike says:

      If you sign a contract which allows that, then it’s your own fault.

    3. truthsayer says:

      @Mike the problem is: there is no other option besides this awful predatory 24 MONTH contract in which they are free to price gouge away.

      In my central London building, BT/Openreach has complete monopoly because the developer didn’t want the hassle of signing a wayleave with any altnet. It’s either this contract or no internet. Monopolies have no place in a free society

    4. Rich says:

      They should have to quote the monthly price as a “contract average” assuming inflation matches government forecasts at the time of signing. Obviously inflation might vary, but gives the customer an idea.

      Suddenly they would feel no need to schedule price rises.

    5. Iain says:

      Mike is being ridiculous, entirely ignoring the concept of consumer protection. Unlawfully unfair practices and terms are not enforceable. Nor should they be.

    6. tom nolan says:

      ive been with hyper nearly 5 years best out of the suppliers and ive dumped a few..

  2. Jazzy says:

    If you’re in a contract and signed up for 18 months, they should not be able to increase it at all, this is one of the reasons why I left EE and pay monthly mobile agreements. Sign up for a £12 SIM and before you know if, you’re paying £12.83 for it. This is why I now buy my new iPhone direct and put a PAYG sim into it and control exactly what I am spending, down to the penny and I am up and off if it changes and there’s a better deal out there

    It’s not so easy with fixed broadband but there should be a ban on price increases during a contract term. They don’t allow you to decrease without penalty and so therefore they shouldn’t be allowed to do the same. It should be a fixed rate deal

    1. Mike says:

      It’s stated quite clearly that they will do this, can people not read any more?

      I suppose given the state of the school system it shouldn’t really come as a surprise…

    2. Jazzy says:

      I think that’s a bit unfair, Mike

      Yes it’s stated and because of that I will no longer get a contract phone or SIM from the likes of EE. Both me and Anon have walked because of it

      I am with Giffgaff currently and my partner is with SMARTY, both of us used to be on EE contracts but PAYG is often cheaper than the big boys and the deals and getting less and less. It’s much cheaper to buy direct and source the phone service separately

  3. Mike says:

    I agree with the sentiments so far.

    Would it not be better to banish all but the 12 month contracts
    so that a savvy consumer could then synchronise a change of ISP
    as and when they announce their sordid price increase?

    OK, we know the ISP has to recover the costs of setting the
    connection up over 12 months and not the usual 18 (or so).

    So the consumer can expect a slightly higher monthlies.
    But at least the savvy consumer could then tell the ISP
    where to stick the price increase!

  4. James says:

    I’ve fallen foul of this – my Broadband was ordered at the start of October, supposed to be delivered beginning of November and finally delivered at the end of December. I then had a 12 day outage in March. So 2 months of service at the price agreed and they are raising the price by nearly 10%! So whilst I new their was a mid contract price rise I thought a) it was mid contract and b) I would have at least 12 months on the agreed initial price – not two. It’s alos quite sharp practice to pin it to the rate of inflation plus xx% as there’s no predicting what inflation will be.

  5. Freddie F says:

    I have been with tesco Mobil who I believe use O2 for 3 years on contract and there no price increase promise works

  6. Iain says:

    Mark in the article you say:

    > To be fair, quite a few ISPs do state their CPI + X% rule on the product pages, but you often have to scroll down to see it in smaller print.

    That’s the thing though. The headline terms are misleading, and saying the user can scroll to read small print is unfair.

    Remember broadband used to be advertised in the big print as “£5 a month*”. (Small print: “* £24.99 line rental”). These mandatory mid contract price rises, hidden in small print or down the page, are similarly misleading.

    1. Mark Jackson says:

      I don’t disagree, but is it enough just to make it more prominent?

    2. Bob says:

      They could be in breach of the Consumr rights act which says key term must be prominant. There is also a good case in they are misleading Consumers by aeklling them as fixed price contracts when they are clearly not

    3. Iain says:

      @Bob, I’d agree.

      @MarkJackson, is it enough to just make it more prominent? I don’t like mid contract price rises, but I suspect they’re lawful if they make the predicted monthly payments part of the headline, e.g. “£30 a month for 8 months, followed by £32.40 for 12 months if inflation (CPI) is 4%. Average price over the 18 months fixed term is approximately £31.33.”

      That’s a bit of a mouthful for a headline figure, especially if they have to make £31.11 or £32.40 more prominent than the £30. So transparency in advertising might reduce the practice of mid contract price rises.

  7. Rain3h says:

    “a view to ultimately giving them the right to leave their agreement without charge”

    I looked into getting hyperoptic as they serviced my last building but I avoided them because if you move to an area they don’t offer services in you still have to pay the remainder of the contract.

    Have they changed their position on that? I don’t understand why they would try to play the good guy while also being the bad guy.

  8. Bob bob says:

    Having looked at the BT Web site I would say they are clearly in breach of the Consumr rights Act which says Key Terms should be prominant and they are not

    You go to themain and is says it is a 24 monnth contract. It makes no mentio of being able to change the price nor dies it referer you to the f&c’s. There is a symbolagainst the price but I fould fing no reference to it/Even the t&c’s are nard to find and they make no mention of price changes. When tou look at the price guard it states they can change the price.

  9. Edward says:

    Well… Virgin sends letter approx 4-6 weeks before price hike and in that letter it clearly says that you can leave if you don’t agree to that…

    Sad thing is.. Loyal elderly customer who has been with them for 15-20 years and never questioned those hikes is probably paying over 100 quid a month for most basic internet… while new customer or savvy one who ring up every year to *cancel* due to price increases, gets great deal at 25-30 a month.

    1. Badem says:

      Problem with their letters is it does not actually state how much your bill will go up by leaving it up to you and try and calculate against an incomplete calculation, last letter I had said it would go up by CPI+Inflation but no actual figures.

  10. Alan says:

    Plusnet raised my renewal fee a month ago to £27.94
    The best speed I could acheive was between 28-32Mb
    When I caled PN to cancel, the first question I was asked “Is this because of the price rise?”
    Reply:- “Yes of course”
    I changed to Mobile Broadband with a 50Gb Data Sim at £15 on a 30 day rolling contract
    My download speed is now 70 – 75Mb
    A no brainer

  11. Clivey B says:

    I’m afraid if you’re relying on Ofcom, forget it, there about as much use as myself and you screaming at them to bring their prices down, sometimes I wonder who is paying their salaries, and of course, these providers profits won’t increase, honest guv. The whole lot of them need a massive overhaul, and not by the like’s of Ofcom, they are the last people I would want to challenge them. Suggest a new government body set up, a fair one who act on behalf of those being ripped off. Another thing, you’d be forgiven, for thinking that everyone in the UK is on £100,000 a year. Controversial init, but at least I feel so much better now.

    1. Can I be the next Prime Minister please says:

      I quite agree. When someone tackled them with an foi regarding fairer prices for sub superfast broadband (vdsl) they said they had the info but it would cost over the limit to provide it. Coupled with the problems people have reported here with trying to get fttp organised, one can only assume it is yet another great british ripoff.

  12. Steve says:

    Ahh yes.. turn to ofcom..the Ofcom that turns a blind eye to ‘charge to mobile’.

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