Consumer Pricing Bill Might Ban Discounts for New UK Broadband Customers
The Consumer Pricing Bill (CPB), which seeks to “prohibit the practice of offering preferential pricing to new customers compared to existing customers“, will today get its second reading in the House of Commons. The Private Members Bill (PMB) could, if passed, effectively prevent first term discounts on broadband ISP and mobile packages.
At present new customers to a broadband, mobile or other service frequently benefit from big discounts that are designed to attract them, which often run for the entire length of your first contract term. After that the price you pay typically increases, often dramatically, and customers who choose to remain loyal (post-contract) may find that they can’t access the same deals as new customers (aka – “loyalty penalty“).
The practice of offering discounts to grow take-up is fairly common amongst the market’s largest providers and, indeed, in any aggressively competitive commercial market (this is by no means a telecoms specific issue). On the flip side, many smaller providers don’t play this game.
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In recent years, Ofcom has implemented various changes to balance this, such as the introduction of Social Tariffs and End-of-Contract Notifications (ECN). This system requires all fixed broadband, mobile, home phone and pay TV providers to issue such notifications to existing subscribers at the end of their term, which are designed to keep them informed about the best deals on their current provider and to boost switching.
However the new CPB, which has been tabled by Labour MP John Spellar, appears to advocate for the nuclear option to solving the discount problem (if we can call it a problem) by very generally “[prohibiting] the practice of offering preferential [lower] pricing to new customers compared to existing customers; and for connected purposes.” Providers that fail to do this could face penalties, such as fines.
No Easy Fix
On the one hand, it’s easy to understand the attraction of such a bill, since in all likelihood it would result in more standardised pricing and make it easier to compare packages between providers. This is particularly true when you consider that some ISPs still fail to make their post-discount (or post-contract) prices clear during the order process, which is an issue that we’ve raised countless times before (this could of course be fixed in other ways, such as via new advertising rules).
On the other hand, commercial businesses do like to have some flexibility to compete on price and discounts in a competitive market. For example, operators that are investing to build new full fibre (FTTP) broadband networks need to grow take-up and strategic discounts help to deliver that by pulling consumers away from established players.
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However, balancing against that, is the fact that banning the practice might also slow the ‘race to the bottom‘ outcome on pricing in the current market (i.e. prices fall so far that gaining a return on the investment becomes difficult and quality suffers), which might in turn make investments in new infrastructure more attractive. But in reality, the downward pressure on prices from competition would still exist, even without discounting.
Scrapping the approach entirely would also hit savvy consumers who save money by switching more often (i.e. they’d face higher prices) and it may be difficult to police in such a complex market (there are ways to do discounts by stealth, such as via subsidiaries). Suffice to say that figuring out whether such a law would be a good or bad thing is not always as simple as it sounds.
Furthermore, there’s also a question mark over how far the law itself would extend, since the proposed text talks about applying it to both goods and services (e.g. stamp duty on homes? Airlines? – there will need to be some limitations). A major consultation or detailed impact assessment would first be required in order to guard against the law of unintended consequences.
At the time of writing, the bill has yet to be fleshed out, and the reality is that it may never happen. Only a minority of PMBs ever become law (they can be tabled by any MP), but they do often serve a purpose by creating publicity around an issue and encouraging wider debate. In that sense, it will be interesting to see how it progresses, but our suspicion is that it will not survive the usual parliamentary process.
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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, BlueSky, Threads.net and Linkedin.
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WTF they should be banning contract price INCREASES not discounts
Time and time again it gets proven that the consocialists and liebour hate the people they represent
Something to think about here, there would not be those mid contract price rises as then the ISPs would not need to get existing customers to pay for the discounts for new customers. Makes it much more fair for all and stops people jumping from one ISP to another just to grab discounts at the expense of loyal customers.
Personally, maybe go one step further and ask those that have gone from ISP to ISP for discounts is to get them to pay back some of the money.
Absolute hyperbole, John. In a properly competitive market, nobody would be getting ripped off. At the moment, existing customers get ripped off.
The market is failing, so regulation makes sense. This was recently introduced for insurance renewals, and the world didn’t end.
Yes, if you frequently switch, you might end up paying a little bit more. But this prevents absolute price gouging of the many more loyal customers.
WibbledOff:
“Personally, maybe go one step further and ask those that have gone from ISP to ISP for discounts is to get them to pay back some of the money.”
How are you trying to blame consumers for the way ISPs behave? Are you okay?
@Spoffle Customers also have to act responsible, it goes both ways
That is completely false. New discounts are made to attract customers, without them then it becomes a lot harder for a new ISP to compete and the BT monopoly continues. Charging more for existing customers is pure unrelated greed
People would not switch if they weren’t getting shafted by these increases and if their service was not crap
Switching providers means that the market competition is working
Being “loyal” to a poor expensive service is not a virtue, it is simply dumb
@WibbledOff
Moving providers for a better price is acting irresponsible? Are you being serious right now?
@Spoffle If you keep doing that then yes, you could even go as far as exploitation. It’s no different to how some people in this country exploit the mobility scheme and get new cars every 3 years, while the hard working in this country have to pay for it.
Comparing govt giveaways to private companies makes no sense …
If Netflix removes everything from its platform and jacks up the price to 100 per month it is stupid to remain a customer. Same goes for ISPs
@John I guess it comes down to if you have morals or not, I’m guessing some people here don’t.
@John As for your netflix comparison, that would be classed as cease of service.
Switching to a better/cheaper service is simply the smart choice
Staying with a poor/expensive service is simply dumb/ignorant, not morally superior
I can’t believe this is even an argument. No wonder BT had a monopoly for so long
@John There is nothing wrong with switching to a different supplier for a cheaper deal if that supplier gives that deal to their existing customers as well, what is morally wrong is constantly playing the system by switching providers on a regular basis just for the simple fact they offer a lower price for new customers only.
This is why I compared it to those that play the disability system, expecting others to pay just so you can get it on the cheap, it doesn’t matter if you are exploiting the private sector or public sector, it’s still morally wrong.
I guess you are from the entitled generation as it sounds like it to me.
Customer A is happy with his current contract, potential customer B is on the fence. Company X launches a black friday deal that attracts customer B. Customer A is still happy with his current contract. There is literally zero connection between both customers
You’re essentially saying that if you buy a sweater, then someone else got a black friday deal then you’re somehow entitled to go back to the shop and get the difference refunded like are you even for real. And I’m the entitled one?
There is a very clear difference between a private company opening their own pockets for “exploitation” (that actually favors the said private company) and the government opening the taxpayer wallets to throw away money stolen from the population
@John Changing the goal posts beyond the point of this discussion of the article will not excuse your immoral ways. When doing comparisons do like for like, this article has nothing to do with black Friday deals and you know it.
If all this goes through and it stops people jumping from provider to provider to leach, then good and I will personally make sure those that have been leaching for years pay for it. As they say in gambling terms, the house always wins.
Specifying an example is not moving a goalpost, the same argument works for EVERY discount. Meaning I can replace black friday discount to “Neymar appreciation day discount” or “chinese new year discount” or “my dog took a big dump discount” and the argument still applies
Then again if you think competition working as intended and choosing a better offer is leeching from a company that is offering a discount, completely disregarding the fact the company would not put up a discount if they did not think it was worth it, then I’m arguing with a wall
@John let me put this in layman’s terms, you have gone from comparing deals that only new customers can get to black Friday deals. If a provider does a black Friday deal for both new and existing customers that’s okay, but again it’s not the black Friday deal that’s the issue it comes down to only including new customers.
Not sure how basic you want it. Lol
A black Friday deal (or pretty much any deal) exists to capture new customers. It does not get applied to existing customers.
You do not understand how marketing works
@John Looks like you need a history lesson on what’s the meaning behind black Friday and where it’s orgin comes from.
Maybe you want to tell Amazon of your assessment of black Friday, never seen any of their deals with new customer only. Oh, speaking of Amazon, what are they famous for, yes that’s right, low prices lol.
I suspect some people above may be debating away from the focus of ISPreview’s take above, which is on ‘services’ provided by commercial broadband and mobile providers, and as a consequence are arriving at crossed-purposes without realising it. Let’s keep this fixed on telecoms services, please, otherwise the debate is going to get lost in the woods.
Thus far, I have not seen any broadband providers offering the same Black Friday discounts to both new and existing customers. But in the context of the proposed bill, it is clear, that this applies to any discount (“preferential pricing”) that is only available to a provider’s new customers. So, a provider that makes the same offer available to both new and existing customers would still be able to offer that discount – the bill thus does not completely ban discounts.
In addition, there is nothing at all wrong with switching ISPs just to save money (it’s immaterial to this whether the gaining provider has different prices for new and existing customers – that’s a separate issue). This is a competitive commercial market, and that is precisely the reason why such discounts are offered in the first place. If it were a state-funded service, then that might be different, but it’s not. This is a fundamental aspect of how open markets, choice and consumerism work in a democracy.
The debate was focused on discounts. The same argument applies to any service, not just telecoms though
But according to him, you are unloyal and immoral Mark, how dare you not stay permanently in the same service
@John I actually agree with you on something, yes it doesn’t just apply to telecoms.
Though Mark is correct, nothing is wrong with going with another supplier to save money, buthe did miss the point in his comment regarding that of what the article is about and that is the unfairness to existing customers if they are not allowed the same deals. This issue only seems to occur in the UK with telecoms, why is this?
I told you lot you of voted for labour under Jeremy corbyn in 2019 election but you didn’t listen. dont say corbyn is unelectable because none has got a crystal ball like mystic meg. if you labour under starmer reeves lamey ect then the answer is yes there . I am a ex labour voter now because of starmer and his tory m8s on labour front bench .
Yes, there are complexities. But there is prior are for regulation, for insurance renewals.
They should banned mid term contract price increase instead of discount. WAKE UP!
At the very least, any price increases should be capped at the lower of the actual rate of inflation or the price the company is willing to commit new customers to for a product that would be considered similar.
I don’t mind a sensible increase for inflation, but not if I everyone who joins the day after gets the old price – that’s just a sign that the operator clearly doesn’t need the extra money.
Andyk, I somewhat agree, but I’d go further. Even inflationary price rises are possibly unlawful, because they don’t advertise the likely range of prices clearly. It’s no different to how Ryanair used to pretend flights costed a quid (small print plus tax), or how broadband companies used to advertise broadband for £4.99 (small print plus a fortunate on line rental).
When you look at mortgages, they have to tell you what the variable rate your mortgage will revert to currently is, after your fix ends. In contrast, with broadband, they’re getting away without telling you plausible monthly costs, after each mid contract price rise.
Ultimately, if providers want to increase prices, they shouldn’t lock customers into long term contracts. It’s unfair to have it both ways.
What needs banning is the absurd practice of advertising the discount price.
The entire communications industry has developed a dangerous habit of huge headline prices that are heavily discounted but only for 3/6/12 months on a minimum contract term of well over that. It’s that that is fundamentally wrong about the way that these companies attract business nowadays. They should be made to lead with the standard price, and follow with the discount price with the terms in clearly legible text the same size or smaller than the price the customer is actually committing to.
I think you could probably get two birds with one stone by requiring providers to use the total price over the minimum term in their advertising, and making that at least as prominent as any periodic figure.
This discourages initial discounts paid for by a higher price through the rest of the contract (£10/month for 6 months then £35/month for 18 months is the same as £25/month for 24 months), and it also puts downward pressure on minimum terms (£60 for 6 months is a smaller price figure to quote than £120 for 12 months).
It still permits providers to have a temporary low price to encourage switching when entering a market – you can offer £15/month for 12 months when your “standard” price is £35/month, and not permit existing customers to pay the lower price when they reach the end of their 12 month period.
And it also wraps up the trick of a high install cost versus a long initial term; if you charge £120 for an installation, then £25/month, no minimum term, while your competitor charges £35/month, no install charge, you have to say that the first month costs £145, then it’s £25/month after that, while your competitor has to say that the first 12 months cost £420, then it’s £35/month after that.
Well about time, think of all the ewaste and routers just wasted after 1 year because they just wanted to hold onto the customers when they know after contract term they’ll most likely just leave and go with someone else and they’ll provide another modem.
It was a mad profiteering model at the cost of the global problems and short-termism. And that short term model is flawed, just look at the electricity, had they invested heavily on nuclear 10 years ago, we wouldn’t be held to ransom by putin… now they found 100 billion to give to energy companies!
Personally, I think I would first try banning long term contracts. Eg, make the longest term residential contract 3 months (or even one month). That would (hopefully) make the big ISPs think twice about crazy initial pricing.
Having the longest broadband connection under contract for just 3 months isn’t good business as it does not give either the customer or the ISP the security that in the case of the customer they have a secure broadband connection and they don’t need to worry about changing ISP 4 times a year or renewing 4 times a year and in the case of the ISP they have a secure revenue stream guaranteed for that period of contract.
What they should do is have 3 term lengths of contract each with different levels of cost per month which would be monthly, 12th monthly or 24th monthly with social tariffs only available on monthly or 12th monthly depending on the ISP.
What does need to be reduced is the amount of discounts used to attract new customers funded by existing customers which hopefully would mean a reduction in mid term contract rises or if the existing customer wishes to renew with their ISP than for the new contract price offered by the ISP to be reasonable and fair eg if a ISP offered £28.99 a month for 24 months than I would expect a new offer of £32.99 to be fair not £47.00 a month as some ISPs do.
Would simply result in high ‘install’ fees deterring people from moving.
Confused am i. Does this mean that when Dankshire finally gets fttp, they will not offer a discount like all the others mainly in cities have enjoyed?
Apologies on behalf of all those in cities costing a fraction of the price per premises it will take to enable your quarter of Dankshire.
Rude of us to not subsidise you both through ongoing pricing being artificially high as it may not reflect cost of deployment and through being rude enough to have these lower costs somewhat reflected in introductory pricing before the ongoing subsidies kick in.
Sorry about that.
@XGS
Dankshire and lots of other rural areas provide your food, think about it.
I believe it’s paid for at the prevailing market rate not provided for free or at discounts because of where I live, Dankshire.
Were it free or discounted you’d have a point.
You’re welcome to move, as I did, to an area with better infrastructure rather than expecting others to subsidise building it and subsidise your ongoing costs on top.
Many costs go along with the benefits of where we both live but that’s life. I get better Internet access at more competitive prices, you get to breathe air that won’t notably shorten your life expectancy.
Or rural folk could charge townies more than local rural shops do for your food. Point is everybody should get the same discounts on a product.
The CMA need to change the wording to something like this.
Discounts for only new customers will be prohibited unless standard customers can avail of the same offer. Eg renewing customers should be allowed at any time to avail of the exact same offer.
All this will mean is everyone pays higher prices, while the ISP’s have the perfect excuse for gaining huge profits claiming its not their fault. Its basically a repeat of the Oil companies.
Except the oil companies don’t dictate the price, the Market does, well the Traders do in effect. So basically nothing like the same at all.
The political class is so disconnected from cost of living realities for most people. But then what would you expect when they have tax-payers funding their mobile, broadband, energy bills and travel “expenses”.
So…you think it a bad thing that the government wants to try and stop people from being ripped off by the distasteful practices of private companies? Struggling to see why this reflects badly on the government to be frank.
On the one hand I’d lose out as I’m a serial switcher, with enough time in my life to research and get the best deal available when my contract is up. It’s meant I’ve never paid more than £20/month for broadband.
However I recognise that there are a lot more people who simply don’t have the time/energy/organisational or tech skills to diligently switch providers every 12 or 24 months. The ISPs know this, it’s why they offer the good deals in the first place. Every time I get a superb deal, it’s being subsidied by 100 other people being ripped off.
So in the long run I think this regulation wouldn’t be a bad thing, and I expect it would actually bring the average cost of broadband down for everyone, even if I personally end up paying a bit more.
If you renew at the end of a contract, how exactly are you an ‘existing’ customer? You’re a former customer the moment the contract expires. The next contract you take is New it’s not an extension. Private companies are free to offer whatever signing incentives they want so far as I’m concerned but linking those incentives to a previous contract is shady at best.
I am happy with this proposal as it has made “loyalty” be a less expensive option on home insurance. There’s no reason to make us do a lot of needless work every 12 months or so just to avoid getting ripped off.
ISPs should have simple and straightforward pricing, and if they want to offer incentives to get new customers, they should offer free installation or free wifi kit, not ridiculous prices that they force them to gouge existing customers.