House of Lords Debates Rising Broadband Prices from UK ISPs

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).

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).