Home
 » ISP News, Key Developments » 
Sponsored Links

Ofcom Asks Broadband ISPs to Halt Price Hikes and Offer Social Tariffs

Thursday, Sep 29th, 2022 (8:27 am) - Score 4,376
Money Pounds Savings for UK Homes

Ofcom has revealed that 29% of UK households (8 million) – double last year’s 15% – are still having problems paying their phone, broadband and TV bills. In response, they’ve called on major ISPs to reconsider annual price hikes and ordered TalkTalk, Shell Energy, EE, Plusnet and Vodafone to introduce “social tariffs as soon as possible“.

Consumer broadband, phone and mobile services are often considered to be quite reasonably priced in the UK, but there are always those – often in the most disadvantaged groups (i.e. low income, unemployed etc.) – who may struggle with paying their bills. The latter became a much bigger problem during the COVID-19 pandemic, and the current cost-of-living crisis – exasperated by a surge in inflation – has spread this far wider.

Until now, the UK Government and Ofcom have largely responded to this crisis by encouraging more ISPs to proactively introduce and promote low-cost social tariffs, which tend to be available to those on certain benefits. The regulator has also previously warned of further action if providers fail to put more effort into tackling this issue, which they said could include the potential introduction of an industry-wide regulated social tariff.

In response, a number of providers have launched social tariffs or upgraded ones they already had, yet many of those same ISPs have separately continued to hit their regular customers with inflation busting annual price hikes of up to around 10% (examples), with worse expected for 2023. Happily, the take-up of social tariffs has more than doubled in the last 6-months – from 55,000 to 136,000 homes, but that’s still just 3% of those eligible.

In Ofcom’s view, such providers should now “consider whether large price rises can be justified at time of exceptional financial hardship,” but they’ve so far stopped short of making a more significant market intervention. Nevertheless, today’s industry recommendations have clearly become more prescriptive, and this reads like a final warning from the teacher to the sector, before harsher measures are potentially enacted.

Ofcom’s New Recommendations to Industry

➤ The remaining major providers without social tariffs – named and shamed by Ofcom as TalkTalk, Shell Energy, EE, Plusnet and Vodafone – “should introduce a broadband social tariff as soon as possible.” Until they do, the regulator will “expect these firms to waive early termination charges for any customer who wishes to switch to another provider’s social tariff.”

➤ All providers should put a far greater focus on promoting social tariffs. Given almost 70% of eligible customers are not aware that broadband social tariffs exist, they expect all providers to do much more to promote them – as well as making sign-up much easier by providing clearer signposting to these offers on their websites. At present, a lot of related ISPs do not promote such tariffs alongside their main packages and often hide the details away deeper on their website – where they’re easily missed.

Virgin Media (VMO2) has been told to “strengthen its support by offering a superfast social tariff … the company’s current basic offer is an industry outlier and does not recognise the importance customers place on speeds.” This is a reference to the fact that their Virgin Media – Essential Broadband tariff only offers a meagre speed of 15Mbps (2Mbps upload), while most others offer at least 30Mbps+.

➤ Ofcom is also calling on all “major” mobile operators to introduce a social tariff. At present only VOXI (Vodafone’s sub-brand) has launched one and, to be frank, it wasn’t a particularly impressive package.

On top of that, the regulator has today introduced revised guidance on how firms should support customers in debt or struggling to pay. The guidance states that providers should rotate between a range of communications channels – such as letters, email, phone and text – to increase the chances of reaching customers in debt to offer support.

Ofcom also makes it clear that restricting the services of someone who is particularly reliant on them – to push them into paying outstanding bills – should be “avoided or limited, while disconnection should only ever be used as a last resort.” But guidance is not the same as a strict rule.

Lindsey Fussell, Ofcom’s Networks and Communications Group Director, said:

“The cost-of-living crisis is putting an unprecedented strain on household budgets. It is essential that the industry puts its customers first, and focuses on what more it can do to help support them.

This includes a much stronger emphasis on offering and promoting social tariffs, as well as thinking carefully about whether significant price rises can be justified at a time when the finances of their customers are under such pressure.”

As ever, the biggest barrier to the adoption of a social tariff remains the issue of awareness, with 70% of eligible customers not even realising that such packages exist, which is despite all the publicity being given to them over the past year.

The onus is clearly on ISPs – those that offer such tariffs – to do a better job of promoting them, although the government could do more on this front too, as they often communicate directly with those eligible. The calls for a reduced 5% rate of VAT on social tariffs would also help (here), but there’s been no movement on that front (they seem to be too busy crashing the economy with other changes).

However, we should point out that not all providers play the price hikes game, with many smaller players often adopting much more stable pricing and others choosing to keep their prices frozen this year. In addition, the aggressive level of competition in the new market for alternative full fibre (FTTP) networks has actually seen prices come down, rather than go up (here).

Lest we forget that broadband provision also tends to be a business with fairly low per-user margins, which makes it difficult for providers to permanently gift super cheap (loss making) packages to lots of people without putting themselves at risk, or forcing bigger price rises on to other customers. The latter issue won’t be noticeable yet because take-up of social tariffs is so low, but that may change if millions of homes start adopting them.

Finally, Ofcom’s call for all “major” mobile network operators to introduce a social tariff is understandable, but it overlooks the fact that it’s already possible to find some incredibly cheap mobile plans on the wider market (e.g. iD Mobile’s £6 per month plan with 4GB data and unlimited mins/texts). As such, we’re not as convinced that the argument for social tariffs on mobile is as strong.

Once again, it’s worth remembering that the price we all pay for communication services is largely dwarfed by the colossal hikes in energy (e.g. gas and electricity), petrol, food and other bills. If people are struggling to afford even a fairly basic internet or mobile plan, which doesn’t typically form a large chunk of household bills, then they’ve probably got much more serious concerns in those other areas. Social tariffs are thus a relative drop in the ocean, albeit an ocean where every drop counts.

UPDATE 10:03am

We’ve added a comment from the ISPA.

A spokesperson for the ISPA said:

“ISPA members are actively supporting their customers through the cost of living crisis, including by offering broadband social tariffs. The priority now is to improve awareness and take up amongst eligible customers, the recent launch of a social tariff API from DWP will help make it easier for our members to provide targeted support and we expect further changes in the market.

Our members came together with Government to agree a set of joint commitments on treating customers who maybe struggling fairly. However, there is more Government can do to help industry, a VAT reduction would enable industry to go much further in the support they can offer their customer’s during these challenging times.”

UPDATE 11:03am

Now Hyperoptic has reacted.

James Fredrickson, Director of Policy at Hyperoptic, said:

“The pressure is rightly growing on all broadband providers to take social tariffs seriously, promote them properly, and rethink their mid-contract price rise strategy – the trouble is that many providers are addicted to these price rises to protect their revenues. Without a harder intervention from regulators like CAP and Ofcom, consumers risk continuing to be hit by these hikes without the right to leave their contract.”

Share with Twitter
Share with Linkedin
Share with Facebook
Share with Reddit
Share with Pinterest
Mark-Jackson
By Mark Jackson
Mark is a professional technology writer, IT consultant and computer engineer from Dorset (England), he also founded ISPreview in 1999 and enjoys analysing the latest telecoms and broadband developments. Find me on X (Twitter), Mastodon, Facebook and .
Search ISP News
Search ISP Listings
Search ISP Reviews
Comments
21 Responses
  1. Avatar photo Humphrey says:

    Surely the likes of Plusnet are already cheap enough?

    1. Avatar photo Matt says:

      BTs social tariff (up to 80mbit) = £20/mo -12mo contract
      40mbit = £15/mo
      Plusnets cheapest tariff (up to 80mbit) = £23.99 -18mo contract
      40mbit = £21.99/mo

      so… No?

    2. Avatar photo Humphrey says:

      Ah okay – yes makes sense to undercut yourself when you want to kill a branch of the group.

    3. Avatar photo AnotherTim says:

      Also the BT Home Essentials includes 700 minutes of UK and mobile calls – Plusnet charge £10+ a month extra for a call plan, or 26.3p + 17.15p per minute without a call plan. So that makes Plusnet about twice the price of the BT social tariff

    4. Avatar photo Crotchety says:

      Why should any ISP be allowed to increase their prices by more than inflation?
      Inflation plus 3.9% is ridiculous. Why the 3.9%, inflation is going to give them approx 10% surely that’s enough for any business.

  2. Avatar photo Ell says:

    I agree with what OFCOM is saying for example:

    Virgin only offer 15MB speeds when BT for the same price for the 38MB speed can offer double the speed however Virgin offer it as a 30 day package whereas BT only offer it as a 12 month or 18 month contract but also BT also offer up to 78MB speeds too.

    So Virgin could easily boost the speed to 38MB.

    As to awareness of social tariff’s, using Virgin as a example not all their own staff are aware of the offer so what hope does it give the wider general public?

    As to Voxi being the only current mobile operator with a social tariff while this is a step in the right direction, it is limited to 6 months after which you are placed on their lowest data plan..

    That said, if they can offer it then there is no reason why Three, EE or O2 can’t offer something similar eg if Virgin offer social tariff Internet on a 30 day plan then seeing as Virgin and O2 are part of the same company then there is no reason why O2 can’t do the same.

    1. Avatar photo Humphrey says:

      Forget what contract BT and the others give – you are not allowed to hold someone to the contract term anyway. VM just go with this but others don’t when they advertise.

      I agree they could and should up the speed on VM – I think 50 used to be their basic package ( up from 20 yonks ago)

    2. Avatar photo Humphrey says:

      Also many people, me included have a basic as chips mobile plan and use wifi calling anyway – Sky is a good example – they offer 100MB of data and unlimited calls and texts for free for life if you buy something else from them – so a cheap accessory will get you that sim – and Sky mobile are 30 days anyway always have been. Even if you buy a phone it states you can kill the sim in 30 days.

      So as I got some headphones from them – my sim is free (usually £5 a month) for as long as I want to use it.

    3. Avatar photo Billy says:

      Not bragging (no good way to say this without it looking like that, but so be it) but i’m currently paying £18 a month to Virgin Media for 100mbit (retention, told them i’d quit) and £6 a month unlimited 5G which gets me over 400mbit 90% of the time. The three sim is a cashback sim.

      It only takes a little bit of effort and planning to get a good deal. I got the 5G so that I could have a backup link as I work at home now permanently but it helps when swapping ISPs as I should always have one that works.

      Granted if you’re not in a VM/5G area, your options are more limited.

  3. Avatar photo Optimist says:

    Reducing the VAT rate on telecoms services would help.

  4. Avatar photo I HATE TALKTALK says:

    Having Ofcom make Openreach offer a wholesale social tarrif woud help as all ISP’s could offer social tarrifs

  5. Avatar photo Crotchety says:

    Social tariffs are one aspect of price rises, to even think of an increase in double figures is to put it bluntly, disgusting. What is the extra cost to ISP’s to give them an excuse to raise prices ? Why the 3.9%, is not the inflation rate enough to give them an increase in their profits, don’t tell me that a 10.0 % rise is not enough for them, and if they think it is then its pure greed.

    1. Avatar photo HullLad says:

      The Internet and underpinning infrastructure is literally run by huge data centres and requires huge amounts of electricity to keep ‘on’.

      That’s before staff costs come in to play.

  6. Avatar photo Crotchety says:

    Social tariffs are one aspect of price rises, to even think of an increase in double figures is to put it bluntly, disgusting. What is the extra cost to ISP’s to give them an excuse to raise prices ? Why the 3.9% ? is not the inflation rate enough to give them an increase in their profits, don’t tell me that a 10.0 % rise is not enough for them, and if they think it is then its pure greed.

    1. Avatar photo XGS Is On says:

      ‘What is the extra cost to ISP’s to give them an excuse to raise prices ?’

      Yeah I’m not going into this one. Given you are clearly okay with no pay rise and in your mind the supply chain issues haven’t made network equipment more expensive not a huge amount to add.

      Seriously we can argue the level of the price rises but the justification for at least some is blindingly obvious.

  7. Avatar photo Rich Branston says:

    Rather than one-size-fits-all social tariffs on the lowest bandwidth tiers, they should offer 20% off on the tier of your choosing.

    1. Avatar photo XGS Is On says:

      If a person can afford 900Mb with 20% off they don’t need a social tariff. They can manage on 500 paying going rate.

  8. Avatar photo james smith says:

    Well….why is it that a mobile operator can offer me a data sim to put in my own router, but an open reach partner discriminates against me if I use my own router?

    1. Avatar photo Tech3475 says:

      What do you mean by “discriminates”?

      Since I switched from ADSL and used an OR Modem/ONT, I’ve not had any issues using my own router for broadband, besides entering credentials which were either generic or provided by the ISP.

      The only time I ever HAD to use the ISPs router, it was either because of telephony thanks to the digital switchover or for diagnostics (the latter I find understandable).

    2. Avatar photo Billy says:

      how are you discriminated against for using your own kit? ONT’s have to be registered with an ISP in order to actually work as they’re encrypted. VDSL/ADSL you can use any compatible modem/router. OK some ISPs won’t give you PPPoE details (e.g. Sky) but you can find them yourself from the ISP router.

      I don’t understand what you mean by discriminated against. It’s was no different for me when I used my own on an openreach backed ISP.

    3. Avatar photo Tech3475 says:

      @Billy

      Sky/Now at least with VDSL/FTTP use generic details, so you don’t need to extract anything, as long as the replacement router supports ‘DHCP Option 61’.

      Here’s what I have on pfsense under the ‘send options’ for WAN:
      dhcp-client-identifier “1234567890ab@skydsl|1234567890abcdef”,dhcp-class-identifier “7.16a4N_UNI|PCBAFAST2504Nv1.0”

Comments are closed

Cheap BIG ISPs for 100Mbps+
Community Fibre UK ISP Logo
150Mbps
Gift: None
Virgin Media UK ISP Logo
Virgin Media £25.00
132Mbps
Gift: None
Vodafone UK ISP Logo
Vodafone £26.50 - 27.00
150Mbps
Gift: None
Sky Broadband UK ISP Logo
100Mbps
Gift: None
Plusnet UK ISP Logo
Plusnet £27.99
145Mbps
Gift: None
Large Availability | View All
Cheapest ISPs for 100Mbps+
Gigaclear UK ISP Logo
Gigaclear £17.00
200Mbps
Gift: None
Community Fibre UK ISP Logo
150Mbps
Gift: None
BeFibre UK ISP Logo
BeFibre £19.00
150Mbps
Gift: None
YouFibre UK ISP Logo
YouFibre £21.99
150Mbps
Gift: None
Hey! Broadband UK ISP Logo
150Mbps
Gift: None
Large Availability | View All
The Top 15 Category Tags
  1. FTTP (5634)
  2. BT (3543)
  3. Politics (2572)
  4. Openreach (2322)
  5. Business (2298)
  6. Building Digital UK (2262)
  7. FTTC (2052)
  8. Mobile Broadband (2007)
  9. Statistics (1809)
  10. 4G (1696)
  11. Virgin Media (1651)
  12. Ofcom Regulation (1482)
  13. Fibre Optic (1413)
  14. Wireless Internet (1408)
  15. FTTH (1382)
Promotion
Sponsored

Copyright © 1999 to Present - ISPreview.co.uk - All Rights Reserved - Terms , Privacy and Cookie Policy , Links , Website Rules , Contact
Mastodon