Hyperoptic Asks Ofcom UK to Probe Broadband ISP Price Hikes UPDATE

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.

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.

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.