The UK telecoms regulator, Ofcom, has today launched a new industry-wide enforcement programme, which will monitor and examine whether in-contract price rises were being set out clearly enough by broadband ISP and phone providers before customers signed up.
In an ideal world, the price you’re asked to pay when you first sign-up to a new provider or package would remain the same until the end of your contract term, but as we all know – many broadband, phone and mobile providers don’t do that and will increase your prices mid-term, often significantly.
Some providers (e.g. Sky Broadband and Virgin Media) approach this by doing a fairly static price increase each year, which can sometimes trigger Ofcom’s rule on mid-contract hikes and enable you to exit your contract penalty free (you won’t know what the increase will be, or when it might occur, until they announce it). But those hikes have not been as dramatic is some.
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However, other providers (e.g. BT, EE, TalkTalk) write a policy into their contract terms that enables them to increase their prices each year by around 3-4% + CPI or RPI (inflation), which is more transparent. But the details are often hidden in the small print, and a lot of consumers don’t actually understand inflation all that well. On top of that, the extra transparency means you can’t exit your contract without penalty when the hike hits.
Ofcom has now decided to take a closer look, which comes after they analysed customer complaints that were made between 1st March 2021 and 16th June 2022, which they say indicates that some consumers “may not have been provided with sufficiently clear information about in-contract price rises, which are usually applied in March or April each year“.
Lindsey Fussell, Ofcom’s Networks and Communications Group Director, said:
“As millions of people are having to deal with rising household bills, it is more important than ever that telecoms companies don’t shirk their responsibilities and keep customers fully informed about what they are signing up to.
It’s vital that people are told clearly upfront about any future price rises they will face while they are in contract, and we’re investigating to check whether this happened in practice.”
Ofcom will now collect further information from a range of providers to assess the steps they have taken to make these terms prominent and transparent. “If we identify specific issues with providers complying with our rules, we may launch separate investigations into individual firms,” said the regulator. But such investigations tend to take a long time to reach completion, so it might be a while before we see some solid results from all this.
In the meantime, it’s worth noting that the Committees of Advertising Practice (CAP and BCAP) – sister body to the Advertising Standards Authority (ASA) – is currently known to be developing new guidance that would require information about mid-contract price hikes to be more prominently stated in ads by broadband ISPs and mobile operators to “avoid misleading consumers” (here). We suspect that this may have a more immediate impact, once the outcome is published in the near future.
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It’s worth adding that the 16th June 2022 date mentioned earlier is no accident. Indeed, it reflects the fact that, since 17th June 2022, new, strengthened rules were introduced that require telecoms firms to provide customers with clearer and simpler information before they sign up to a new deal (here). In other words, everything after 17th would have to be judged in a different context of rules.
UPDATE 11:43am
We’ve had a comment from Hyperoptic.
Dana Tobak, Hyperoptic CEO, said:
“This is a great step forward in preventing the consumer harm of mid-contract price rises. As we highlighted in my letter to Ofcom in April, there’s overwhelming evidence that consumers are unaware of contract clauses, and how they will be affected by them – which is particularly important in this cost-of-living crisis.”
UPDATE 2nd Dec 2022
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Giganet has also commented.
Jarlath Finnegan, Chief Executive Officer at Giganet, said:
“With the cost of living rising and household budgets being squeezed, it is imperative providers are completely transparent when it comes to the terms and conditions of their broadband packages. Providers must do the decent thing and make it clear there may be mid-contract bill increases and exit fees.
At Giganet, our focus is meeting demand by delivering reliable, fair, and fast full fibre broadband, with excellent customer service. This includes abolishing exit fees and nasty mid-contract price hikes – which are so often hidden in the small print.
At this time, we all need certainty, and knowing exactly what we are going to pay – and for how long – is vital.”
More people should simply join lesser known/niche/boutique ISPs that already do that instead of Ofcom & the ASA needing to intervene. However, before some snarky commentator points it out – I fully know that most people are too lazy to actually look for a good provider or understand how the internet actually works and will just search for whichever is the ‘cheapest WiFi company’
The ASA’s proposals in their consultation were weak A.F, for example compared to Ofcom’s required contract summary.
It remains to be seen whether the ASA will improve it based upon consultation feedback
Choose one
a) lock a customer for a period of time
b) be allowed to change the service cost
Companies doing both at the same time is pure greed. It does not make any sense paying 40 per month for a less than 100mb service in central London
“but you are free to leave” no I am not and there are no other options in my block of flats
I know that experiences will vary, my own is that the contract terms were made very clear to me when I contracted for broadband service with BT. The sales agent was at pains to highlight the price increase clause, including the timing etc, making it impossible for me to be unaware that this was part of the deal.
People that dislike such clauses should seek an ISP that does not include them. There is certainly no need to prohibit the use of such terms as long as there is transparency about them at the point of sale.
Quote: “but you are free to leave” no I am not and there are no other options in my block of flats
That may well be down to your landlord as far too many are either lazy, incompetent or greedy. For example, some agree to an exclusivity deal, possibly in return for a payment by a particular network operator.
The ability of these same companies to give you a 18month to 2 year contract at a decent price, then when it ends double it also needs investigating. If they can give it you for 2 years at that price then they can afford to keep it at that price, instead they choose to exploit the customer when the contract comes to an end hoping they remain a customer because they can’t be bothered to look elsewhere.
@Buggerlugz
If you are out of contract then it seems reasonable to see a price premium compared to someone that has committed to service for a given period – there is usually a price for additional flexibility. There may be a case to limit the premium between in-contract and out-of-contract prices from a given supplier, although it is very much a customer choice to be out of contract now given the amount of notice you get as you approach the end of your contract.
It’s good to know that some providers are making the contract terms very clear. That is not always the case.
Virgin Mobile are currently promoting an £18 unlimited data sim via a popular cash back site. I won’t post the affiliate link directly, but it’s easy to find.
The contract terms seem quite clear:
General: Phones subject to availability. Each July your airtime plan will increase by the Retail Price Index (RPI) rate of inflation announced in April of that year (not applicable to oomph bundles). We’ll give you 30 days’ notice of the exact increase. Plans include UK calls to UK landlines (01, 02, 03) & UK mobile networks. Calls & texts to mobiles in Jersey, Guernsey and Isle of Man are not covered by your inclusive monthly usage allowance. UK texts and data only. Speeds experienced will vary by device and location.
If you click on “Grab this offer” it will be added to your basket with a clear message:
Subject to annual RPI adjustments – See below
The contract terms presented below the basket are slightly less clear, considering it’s now December 2022:
RPI Adjustments: From July 2021 (and every July after that) your airtime plan will increase by the Retail Price Index (RPI) rate of inflation announced in April of that year. We’ll give you 30 days’ notice of the exact increase.
But if you proceed to buy this deal (warning – credit check may be required) the actual contract has completely different terms:
Each April your Airtime plan will increase by the Retail Price Index rate of inflation announced in February +3.9%. We’ll give you 30 days’ notice of the exact increase.
That is a misleading advert by the UK’s second largest telecoms company, which has been live right through the Black Friday period. Ofcom and the ASA are right to investigate and should not tolerate this kind of behaviour.
@New_Londoner, I disagree with your statement “If you are out of contract then it seems reasonable to see a price premium compared to someone that has committed to service for a given period”.
The reason for a fixed period with an initial contract is to ensure that costs of establishing the service are recovered by amortizing that cost over the period (router, OR charges, advertising, etc) – so the fixed period charge covers the amortized setup cost and the ongoing cost of provision. Once those costs have been recovered, I think it is more reasonable to see a reduction in the monthly costs as now only the ongoing cost of the service need to be covered.
Ofcom’s announcement is regulatory tokenism. There’s a minor amount of “harm” where people could but don’t understand they’ll be affected, but this won’t help the majority who do understand and will still see a stonking price increase. In an inflationary situation prices will go up a lot, but that begs the question of whether two year lock ins should be allowed (mobile handset deals excepted). The commonest business model is heavy discounts linked to long contract tie ins – that’s a poor model that only benefits people who switch every time the (commercially unsustainable) discounts end, with the costs borne by customers who don’t do that. A whole lot like the complete failure of regulation in the energy market that privatises the profits and socialises the losses.
Networks should be made to give examples.
EE were advertising a half price deal for 6 months than £28 from month 7. Then in the small print was a CPI+3.9% increase. Saying Month 7 price would be £28 (£32.20 based on current CPI) would help people understand the figures. Saying just £28 is misleading.
Then there’s networks still selling phones and airtime as one and basing the increase on it all. That needs to stop.
The problem I have companies like virgin are allowed to put the prices up then trick you in to a small discount to keep you in contract. For example I’m paying £59 for 1gb which they discounted by £3. The service has got so bad I have to pay extra to EE for data as virgin goes down so often. When you agree a price it should stay that price for the 24 months with no charge. Plus ofcom just is totally useless they don’t care for us customers no doubt they get back handers.
The bit I don’t like is where some (like Vermin) base increases on the full price not the discounted price.
So if a package is £50 but you are in an 18 month contract at £25, and it goes up 10%, it will end up £30 rather than £27.50.
Honestly though in a world where I don’t get automatic pay rises 3.9% above inflation, nor should telecoms companies, and we should go back to the situation where any increase gives customers the option to terminate early at no cost.
Quote, “…and a lot of consumers don’t actually understand inflation all that well.”
Well, if as you suggest that consumers have a poor understanding of inflation, anyone who visited their local supermarket in recent months, shall most certainly have a good grasp of inflation, with its over looming effects on one’s purchasing power.
The problem is most ISP’s put that inflation bit in the print somewhere meaning your package goes from £30 to £33 per month or whatever every April. Yet the day after your bill goes up by £3, they offer the exact same package you are on for the same £30 you used to pay to “new customers only”