New UK Ad Rules to Tackle Mid-Contract Broadband Price Hikes UPDATE2
The UK Committees of Advertising Practice (CAP and BCAP) – sister bodies to the Advertising Standards Authority (ASA) – have today set out new guidance for how broadband ISPs and mobile operators should communicate mid-contract prices hikes to consumers, which will make such policies clearer and more transparent.
In an ideal world, consumers who take out a new broadband or mobile contract would enjoy a fixed monthly price for the entire length of their term. But as we all know, many communication providers prefer to shift some of their risk on to consumers by adopting a policy of annual price hikes – regardless of whether or not you’re still inside an existing contract term.
Some providers approach this by doing a fairly static price increase each year, which can sometimes trigger Ofcom’s rule on mid-contract hikes and thus enable you to exit your contract penalty free. In this case, you won’t know what the increase will be beforehand or when it might occur, until they announce it (although rises of 5-6% are common).
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However, most of the biggest providers (e.g. BT, EE, TalkTalk, Vodafone etc.) write a policy into their terms that enables them to increase their prices each year by nearly 4% plus the rate of annual inflation (CPI or RPI) – as set on a particular month, which results in huge inflation busting hikes. But this does give customers some transparency over how big the hit will be, albeit while sometimes removing the ability to exit your contract penalty free (i.e. Ofcom deems you to have been aware of the future increase when you signed-up).
The catch is that, in both approaches, such policies are often hidden away in the small print and many consumers can find them confusing (e.g. a lot of people aren’t familiar with how ‘inflation‘ actually works or the meaning of terms like CPI or RPI). The outcome is thus the same for everybody, consumers who are still within an existing contract will suddenly find themselves paying more than what was originally promoted when they joined.
The ASA also noted that they’ve previously received complaints in the past from consumers who saw a monthly price for a tiered telecom contract advertised shortly before the annual price increase in April, meaning that the initial price only applied for a month or two.
The New Guidance
The ASA (inc. CAP / BCAP) does not have the power to ban mid-contract hikes but, in the absence of Ofcom and the Government taking a firmer stance, they can impose new guidance that would effectively require communication providers to be clearer and more transparent with how they present their packages and prices. We should point out that Ofcom are now reviewing the transparency of mid-contract hikes (here).
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In keeping with that, CAP and BCAP launched a consultation last year (here) on the development of new guidance to tackle this problem, with a view to making changes that would avoid providers “misleading consumers“. As a result, mobile and broadband providers will now need to follow much tighter guidance, which will make it harder for them to promote their services without also being clear about how future prices will change.
“In short, it is crucial that information about any future price increases are clear to consumers in the ad itself, to avoid creating a misleading impression that the initial stated price will remain the same throughout the contract period,” said the ASA.
Key Principles of the New Guidance
The new guidance makes clear that ads are less likely to mislead consumers when:
➤ They do not state or imply that a price will apply for the full minimum term of the contract, if that is not the case – for example, claims such as “£X for X months” or “fixed for X months” are unlikely to be acceptable if the price is due to rise and any subsequent qualifying information is likely to contradict rather than clarify the claim.
➤ Price claims are qualified with equally prominent information alerting consumers to the presence or possibility of a mid-contract price increase.
➤ The details of what the increase will be based on are featured prominently relative to the price.
➤ Inflation terminology is presented in a way that is clear and simple to understand.
➤ They include the full amount the consumer will pay after the increase, once the relevant rate is known.
➤ They make clear where terminating a variable contract due to a price increase will impact other linked services.
Such measures can sometimes have a significantly positive impact upon the market, such as when the advertising authority required fixed line broadband providers to present a single upfront cost for setup charges and to stop separating out the cost of phone line rental from broadband connectivity. Not to mention their efforts to limit abuse of “unlimited” terminology. Hopefully, the same may be true this time too.
The catch is that some providers may not really start to take note of these changes until the ASA begins enforcing the rules with bans. As ever, ads are assessed by the ASA on a case-by-case basis, taking into account factors including the likely audience, medium and context in which the ad appears. But the outcomes of their investigations often arrive months after the advert itself has finished its run, although the provider does suffer some negative publicity.
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All told, it may take a fair bit of time before we start seeing some rulings based on the revised guidance, assuming of course that some ISPs will inevitably fail to adapt (very likely as the ASA is considered to be somewhat of a soft touch). In our experience, it usually takes the market a year or so to fully adapt to new ASA guidance, once it’s introduced.
But overall, today’s changes still represent a positive step forward, even though it might not be the ban on mid-contract hikes that many people would like to see. We should add that not all communication providers play the mid-contract hikes game. A good number of ISPs, particularly smaller players, often adopt much more static pricing that rarely changes.
The guidance will take effect on 15th December 2023, following a six-month grace period to allow advertisers to makes necessary changes to their campaigns.
UPDATE 10:40am
The full guidance has now been published online, which also includes details of the responses from BT, Sky Broadband, INCA, Hyperoptic and others. Speaking of Hyperoptic, they’re the first ISP to react this morning.
Hyperoptic’s Policy Director, James Fredrickson, said:
“We are delighted that CAP is bringing significantly improved transparency to broadband pricing. This is an outcome we have been actively campaigning for. For too long, broadband advertising rules have allowed mid contract price hikes to be kept in the small print, leaving millions of customers unaware of what they’re really signing up to. Now those days will be over.
Whilst today’s CAP announcement grants a 6 month grace period, given the high rate of inflation and squeeze on household incomes, Government should be pushing all operators to comply with these new rules with immediate effect.”
UPDATE 16th June 2023
We’ve had a comment from the boss of Zen Internet too.
Richard Tang, CEO of Zen Internet, said:
“A step in the right direction, which will hopefully result in consumers being clearer on what they will pay, and clearer that the headline price advertised by all the big broadband providers is not the full story.
In 28 years of trading, Zen has never engaged in mid-contract price hikes, and we have no intention of doing so in the future.”
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 Linkedin.
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This is pathetically weak. Compare to the Ofcom information they must provide you just before you sign your contract. Compare to mortgages.
In particular, the problem is ISPs don’t have to tell you WHAT your monthly bill will be in April 2024 and April 2025 (after taking an educated guess as to future inflation). You can bet they’ll have modelled it internally, however.
What consumers want is fixed price for a fixed term. All this piffling around about how price rises are advertised and communicated dodges the issue.
A complete lack of focus by regulators on consumer needs.
That’s a little unfair on CAP/ASA – they are not legally able to ban the practice, so they’ve done what they can to at least make it obvious. The CPRs prevent any regulator from mandating a certain approach to avoid misleading consumers, so the ASA is legally bound to mandate specific actions and can only say “this is best practice and you’ll have to justify any other way of doing it”
The ASA has published all the consultation responses in full – I think you would be interested in the CMA’s take on the situation, as they’ve heavily criticised the price rises and are pressuring Ofcom to ban them.
ASA have been the ad industry’s captive poodle since they were formed, but I take your point – I was thinking generically about what regulators should do, and in this case it is (as always) the chocolate teapot of Ofcom who need to act.
Pathetic, yes the customers knowingly sign up to the tandcs at point of purchase but the process should be made illegal
It also works upstream, alot of Wholesale ISP’s get stung by Carriers (BTW/TTB and the like) who dont reveal the price increases to Wholesalers until the 13th hour, and then those wholesaler ISP’s have minimal time to model the increases through to Resellers that sell to the wider public
How about requiring the ‘one year hence’ price be included next to whatever the starting price is? That should encourage a bit more honesty in pricing.
Although maybe it will just lead to prices jumping in month 14 instead 😀
OK, introductory monthly price, year 1 price, year 2 price, all together in the same size font.
My ISP [A&A] don’t pull any of this stupid s**t, so it surely can be done!
TalkTalk is my ISP! They do have a fixed price contract, which I insisted on having
or it was ‘ByeBye’ from me! The penalty for this is that it does cost a few pounds
more p.c.m. I don’t mind that as I then know my outgoings in advance.
I don’t know why this method is rarely used other by the other ISPs?
There is something really slimy the “From £31.99 a month” in LARGE print
and the vague “Annual price changes and terms apply” in small print.
I wonder how they pick the “Public Consultees”. I rather enjoyed the one who said “this is an abomination” automatic price rises are a terrible idea.
Thought it captured the mode of the average public rather well.
I’ve not looked at the detail of these particular consultations, but there’s a standard approach for government consultations, and in those the consultation is announced, and anybody can have their say.
As a broad rule the public are not well engaged with the consultation process and public response rates are often in the range of 100-500 responses, so business (and or NGO) responses get disproportionate weighting. Moreover, each consultation has a scope, and in this case it was probably “do customers have adequate info on in-contract price rises?”, so that an entirely valid response that such practices should be illegal will be read, but ignored because it is out of scope.
I was involved recently in one of the biggest government consultations in recent years, with over 100,000 responses. Every single response was read, the themes noted, recorded and collated. It was a massive piece of work, for a really, really stupid idea from one of Boris’s cabinet cronies. By the time the results were in, (a) they showed the most overwhelming opposition to the idea that’s ever been seen in any consultation, and (b) Boris and cronies had managed to get themselves sacked. Within the responses there was plenty of abuse from people responding to the consultation yet having not a clue how either government works nor how a consultation has both a scope and a process.
I just find it truly remarkable that mortguages are usually a 2 year fix, untill the last few years energy was a 1 year fix but not internet and phone
Mortgages aren’t fixed rate in response to regulation, they’re offered as a whole range of fixed rates for different terms and different values, as well as being offered as variable rate.
The absolute root of this problem that seems unique to telecoms is that Ofcom have idiotically allowed contracts longer than 12 months with onerous and unjustified exit penalties. If all contracts were twelve months, and/or had an exit penalty only in respect of foregone net profit before tax then we’d see a much healthier market. Instead, under the guise of “helping consumers make informed choices”, the regulators have actually not merely permitted large suppliers to lock customers in and restrict switching and competition, they’ve enabled and encouraged them to do that.
This is so wrong, so bad, but what can you do about it? With the recent changes to move telecoms from DCMS to DSIT it’s not apparent that anybody there cares, but if you’re of an email or letter writing mind, then contact Kevin Hollinrake. As Parliamentary Under Secretary of State for Enterprise, Markets and Small Business, consumer affairs and competition are his bag, although Ofcom are not. Hollinrake is a decent chap who actually has some commercial experience, if you can get the issue on his radar then it might go somewhere.
If you do try that, bear in mind ministers are unbelievably busy. You will have to be a first class communicator to hook him (or likely his staff) with your first line, then to offer a short summary of the problem, and then an idea about what my resolve the problem. And that first line needs to link the problem to his brief of consumers and competition. Or write the same letter to your local MP and specifically ask them to raise it with Hollinrake. Keep it short, pithy, clear and logical, and bear in mind that if it takes more than a single side of A4 then you’re doing it wrong. Every word must count, no word should be there unless it must be there. Writing like this takes a lot more time than being verbose.
I’d force them to equally prominently list what the price would be at the end of the contract assuming inflation were as high as the highest figure in the last 25 years.
E.g. “Starting at £35/m, raising as high as £55/m by the end of the term”
Precisely, that’s actually transparent.
That may be transparent, but the thing is, is it fair?
Essentially it’s requiring customers to take inflation risks without any option to bail, rather than requiring ISPs to use their considerable resources to forecast and price accordingly. In almost all other residential service contract markets the supplier does that, but telcos either think they’re different, or maybe don’t believe they’re different but are just taking advantage of weak regulation.
Smaller ISPs are mostly not doing this, why are large scumbag outfits like BT, EE, Voda, Talktalk et al allowed to get away with this? And an especial mention of shame for Virgin Media, who calculate their RPI+3.9% in-contract price rise on top of the undiscounted tariff, which can mean that on the heavily discounted deals the company pushes hardest, the customer’s effective monthly price rise is more than double RPI+3.9%. How many customers of average intelligence and average reading age (9, for the UK) will fully understand all that? So signing up to VM can easily result in their price going up by 25% or more a year later. Despicable company.
“why are large scumbag outfits like BT, EE, Voda, Talktalk et al allowed to get away with this?”
Because its far more financially beneficial to them with so many customers and the regulator allows them too Andrew.
To be fair to the ASA they dont actually have much powers if any at all, they are backed by Ofcom who do actually have the power. As things stand they are doing more than what Ofcom is doing (which right now is just a plan to consult on it), its very likely they couldnt announce anything without at least a discussion with Ofcom first, and since Ofcom doesnt yet know what stance its going to take, it was unlikely the ASA was going to try and attempt to do much more, the bigger issue is their reactive process to misleading adverts, instead of proactively and quickly shooting these ads down, it relies on people making a complaint, and then a lengthy review process which will often be finished when the ad has already done the damage, and even then the ISP simply gets told to stop running the ad. In short the ASA barely has any teeth.
Ooh two more useless quango’s, wonder how many more exist? Still, jobs for the Eton set no doubt.
Ah yes, the ASA, that famous old-boys-club quango – entirely separate to the government, not funded by taxpayers (voluntarily & anonymously by industry), and without a single Old Etonian on their staff.
The organisation definitely has its flaws, so if you’re determined to be catty and cynical you could at least be accurate.
When I buy a business contact for internet services, the price is fixed for the term.
I find it strange that the consumer market, which is meant to be highly regulated, has a worse situation than the business market.
The logical conclusion is that the regulator is failing in their duty to stick up for consumers.
Feel free to name a regulator who does in 2023 Ben.
Ben so if ‘When I buy a business contact for internet services, the price is fixed for the term.’ how do pricese compare?