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House of Lords Debates Rising Broadband Prices from UK ISPs

Friday, Feb 3rd, 2023 (9:48 am) - Score 3,000
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A short but interesting debate took place yesterday in the House of Lords (Parliament), which saw many cross-party peers call on the UK government – represented by Lord Parkinson of Whitley Bay (DCMS) – to do more to help tackle the impact of recent above-inflation price hikes by broadband ISPs.

The debate, which provides an interesting contrast against today’s other development – Ofcom’s consultation on Openreach’s recently proposed FTTP price cuts (here), follows shortly after most of the major home broadband ISPs confirmed their annual above-inflation price hikes of around 14-15% (here).

NOTE: Lord Parkinson is the Parliamentary Under-Secretary of State at the Department for Digital, Culture, Media and Sport (DCMS).

The hikes occurred despite Ofcom’s calls last year for providers to “consider whether large price rises can be justified at a time of exceptional financial hardship” (here), although the regulator stopped short of making a more significant market intervention.

The catch being that many ISPs, especially larger players, have also been suffering from rising supplier and lease costs, higher energy prices and the ever-rising levels of consumer demand for data. Not to mention the cost of ensuring they cater for various new Ofcom and Government rules and regs.

In yesterday’s debate, most of the Lords appeared to be calling for greater regulation to tackle the sector. For example, Lord Sikka (Labour) accused ISPs of acting in “unison” and said there was “absolutely no justification for the inflation-busting 14% price rise” and “[forcing people] to pay a £200 exit fee“, before proposing to ban mid-contract price hikes and allowing consumers to exit – penalty free – from any ISP contract longer than 12 months (this would effectively ban 18 and 24 month terms, which are usually cheaper).

Meanwhile others, such as Lord Forsyth (Conservative), called for something to be done in order to tackle ISPs that make it extremely difficult (exceptionally long waits) to speak with a human. Lord Browne (Labour) also suggested that the Competition and Markets Authority (CMA) should be asked to probe related contracts “for profiteering and setting up a cartel“, with Browne adding that such terms were often “impossible to understand“. Impossible is a bit of a stretch, but this area is certainly ripe for improvement.

Finally, other Lords called for greater promotion of cheaper Social Tariffs, which are offered to those on benefits, but take-up remains low (albeit growing at a strong pace) due to a lack of awareness and poor promotion by ISPs.

In response, the Government acknowledged that it was a “difficult time for households” and sympathised with many of the points that had been raised, albeit without making any solid commitments beyond what has already been announced.

Lord Parkinson (DCMS) said:

“This is clearly a difficult time for households across the country that are struggling to pay their bills as a result of the global rise in the cost of living. While operators are continuing to invest in gigabit-capable services, the UK benefits from some of the cheapest retail pricing of broadband in Europe, with only around 4% of a typical household’s monthly budget going on telecommunications services.

However, we understand the challenges many families are facing at the moment, so we are calling on operators to consider carefully the need for above-inflation price increases and the impact they may have on people across the country.

Households struggling to afford telecoms services should speak to their provider. Social tariffs are available, as we heard in a Question earlier this week, but also, since last July, providers have committed to support any customers struggling to pay their bills.”

In fairness, prices haven’t just been increasing on telecoms services, which themselves remain well below the much more extreme situation being seen elsewhere in the utilities sector (e.g. electricity and gas). In fact many smaller ISPs and alternative networks have bucked the trend of big ISPs by keeping their prices stable or even discounting them further.

At the same time, others may prefer to try haggling for a lower price when a hike hits (Retentions – Tips for Cutting Your Broadband Bill), although your mileage may vary and this often only works well with the biggest players.

The UK telecoms regulator, Ofcom, has also launched a new industry-wide enforcement programme, which will monitor and examine whether in-contract price rises are being set out clearly enough by broadband ISP and phone providers before customers sign-up (here). But we suspect they won’t end up banning mid-contract hikes.

However, in keeping with Ofcom’s move, the Committees of Advertising Practice (CAP and BCAP) – sister body to the Advertising Standards Authority (ASA) – is already 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).

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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 .
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Comments
8 Responses
  1. Avatar photo John says:

    It is a simple solution really:

    1 – allow people to exit contract with no penalty if the price increases
    or
    2 – ban contracts that can increase in price during contract

    It’s insane how companies can have both at the same time

    1. Avatar photo Aled says:

      Yeah, it strikes me that this is a failure of market competition.

      I suspect what happens is: one company agrees this new inflation process, to justify it.

      Other CEOs at other broadband companies feel shareholder pressure to do the same. So they join in…until some meddling newcomer takes their business away from them.

    2. Avatar photo Matt says:

      I really hope we get some regulation similar to the insurance crackdown we’ve had.

      Banning contract rises in T&Cs (Still allow them, but they can’t be written into the contract) and enforcing allowing people to leave no-penalty would be the way IMO. It’d encourage providers to have sustainable pricing (end of race to the bottom) and they’d have less risk on a shorter contract length. People will continue to subscribe if the price, performance and service is worth what they’re charging.

  2. Avatar photo Shreyas says:

    About time.

    Firstly please read about Cash Cows, we are all treated as such by most companies within the UK since most people can easily to £10 to £35 monthly payments for a service. As the Average Revenue Per User is guaranteed companies do not have to do anything once a customer is acquired, hence just ‘milking the cash cow’.

    Secondly if companies really cant price in inflation (seriously!) then make them advertise a contract with the highest price a consumer would pay over the length of contract i.e Price + CPI in ££ shown everywhere when selling a contract.

    It is such a pain to be locked into a contract and then be hit with price rises. Did you notice pay as you go customers having prices increased for example – The answer is No because these customers can easily switch to a different provider thereby not being ‘milked’ by their provider.

    Same goes for broadband. It is the providers cost of doing business if prices rise. It shouldnt be passed on to me as a consumer when I make a 12 month commitment to take a service.

  3. Avatar photo Brian says:

    Contracts should be fair.

    If the supplier can increase prices mid term on multiple occasions without a clear steer as to what that price should be, the other party should be able to walk away if their ability to pay changes too without penalty.

    1. Avatar photo dave says:

      Absolutely agree

    2. Avatar photo Chrispy says:

      I’ve always thought that if you can sign up for a contract immediately then you should be able to cancel it immediately. In streaming for example there are too many examples of signing up instantly but then having to give 31 days to leave.

      It should be symetrical.

      As others have said if you sign up for say 12 months or 18 months that should be the price, both parties then go into the contract knowing exactly what terms are.

  4. Avatar photo Ad47uk says:

    House of Lords, did they stay awake long enough to discuss anything?

Comments are closed

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