Which? Launch Campaign to Ban Mid-Contract Broadband Price Hikes
Consumer magazine Which? has today launched the “Right to Connect” campaign, which accuses UK mobile and broadband providers of “duping consumers with their sneaky mid-contract price hikes” and is instead calling on the regulator, Ofcom, to “ban this practice” and deliver generally “clearer and fairer pricing“.
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 many providers – particularly the largest players – have recently become notorious for adopting inflation linked price hikes and then making it harder to exit your contract penalty free if you don’t agree.
The most recent approach involves providers increasing their prices each year by up to nearly 4% plus the rate of annual inflation (CPI or RPI) – as set on a particular month, which earlier this year resulted in many consumers being hit by average hikes of around 14% and in some cases considerably more. According to Which?, this means broadband customers could be charged £150 more than they expected over the course of their contract, due to 2 years of eye-watering hikes.
Mercifully, the rate of inflation is now starting to fall, which means that future hikes shouldn’t be as bad as last year. But forecasts suggest it will still take until early 2025 before inflation settles back down to something close to the current 2% target (CPI is currently 6.7% and RPI is 9.1%). But whether Ofcom will go as far as to ban the practice remains to be seen.
So far, the UK Committees of Advertising Practice (CAP and BCAP) – sister bodies to the Advertising Standards Authority (ASA) – have separately 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 (here). But it’s not a ban and those changes won’t be enforced until the end of this year.
Meanwhile, Ofcom is still in the process of reviewing whether inflation-linked mid-contract hikes give customers “sufficient certainty and clarity about what they can expect to pay” (here) and a verdict is expected before the end of this year. At the very least, we think that mid-contract price rises should give consumers the option to exit their contract penalty free.
However, it’s important to point out that not all ISPs play this game, with Sky Broadband typically introducing less aggressive broadband rises (this year it was below the level of inflation) and many smaller providers being much more gradual in their increases, if they increase them at all. On top of that, many modern full fibre (FTTP) networks have managed to buck this trend, often reducing prices rather than increasing them – due in no small part to the aggressively competitive market.
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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‘Sneaky mid-contract price hikes”….
That’s hilarious. Operators’ sale advisors are up front and make it clear that there will be price increases each year. Plus it’s in the T&Cs.
To be fair, a lot of that detail ends up in the small print and surveys show that many consumers find the inflation linked approach confusing (inflation is not as well understood by all as it might be for you or I). Not to mention that many ISPs make it very difficult to see post-contract pricing on their packages, which can often mask increases of 50% or more.
I hope you agree Mark that any changes will not result in prices coming down for the contract period??
Yes and that’s fine, so long as the price you signed up to is the price you pay, until the end.
Some are sneaky, Plusnet offers a contract sign-up price on their website. But what they do is give you the full out of contract price then “discount” that with a monthly credit during the contract. Which is fair enough, except…
They apply their mid contract price increases to the undiscounted post contract price. So the effective CPI+3.9% increase is actually usually 2x CPI + 7.8%. Do you think they also increase the original in-contract discount by CPI + 3.9%???
I’d like to see long term contracts and discounting banned and a one published price, whether bought from the ISP’s website, comparison site, or existing customer. If it has to go up for inflation that’s fine, but is should be the same for all customers, with no special discount prices.
When you go into Aldi’s or Lidl for a can of beans the price is the price is the price. It may go up, or down, but it does so for everyone, and is transparent.
A can of beans may be the same price for everyone at Aldi or Lidl, but at Tesco and Sainsburys, the price varies depending on your loyalty card data. There’s an upper limit that’s the same for everyone (and is on the shelf edge), but different people pay different amounts for the same product.
Fundamentally, mid-contract inflation-linked price rises are different to discounts for being in contract, though. A mid-contract inflation-linked price rise is purely about moving inflation risk from the provider to the consumer; if inflation is high, the consumer has to cover the increased price. There’s no gain to the consumer from such a contract term (although there is a gain in certainty if the price rise is not inflation linked, but is instead limited by contract).
A discount for taking on a contract term is, instead, about trading certainty for price; the provider gets certainty that you will pay them every month for the contract term, and the consumer gets to pay less money. This is a trade of one form of risk (consumer cannot now walk away unexpectedly) for a different sort (consumer gives you less money) on the provider end, and a similar sort of trade on the consumer end (pays less now, but can’t walk away if the provider is awful or a better overall deal appears on the market).
Ideally, Parliament would put together primary legislation that says that in any consumer contract, the maximum price that you can pay in any payment period is fixed by the contract to a known amount (no use of indexes or similar – has to be fixed relative to the first sum paid) and price rises above that amount result in cause for breaking the contract. Then, you get to trade risks; the provider puts a clause saying “10% price rise every year” in, and takes the risk that inflation will increase their costs by more than 10%, but the consumer is certain that the worst case in a 24 month contract is £x today, £x * 1.1 after the first annual price rise, and £x * 1.21 after the second.
This would be unpopular with providers, because it means that they have to put their estimate of where CPI would be at the time of the rise in the contract – and if their estimate is high, consumers will balk (“I’m not signing this – a 20% rise is unreasonable!”) and go elsewhere, while if it’s low, they suffer the effects of high inflation and can’t recover their costs from consumers (because they’ve tied in to – e.g. – not more than a 6% rise).
Mid contract price rises should be banned, simple as that.
If you want my business for 12 or 24 months, price it appropriately for the lifetime of the contract.
Whilst we’re at it, ban rediculous post contract pricing. Plusnet want £55 a month for FTTC once my 12 month contract is up but will let me pay £28 if I re contract for another 12 months.
So either recontract with Plusnet or change to another supplier that offers one month contracts – the latter are fewer and far between but do exist, e.g. Pulse8 offers 80/20 FTTC (well it’s SOGEA now) for £37, or 40/10 for £31 a month. Or NOW Broadband for £21 a month plus £60 for the no contract option.
companies shouldnt increase price every year, should be every 2 years and if the prices are going to be gone up then we should be able to leave without any fees. these early leave fees are made up…
Its the buy out of the contract.
It’s usually the remaining amount left with a slight discount.
If you feel your not getting the service raise a fault and follow the process.
I’ve not really had a problem with mid contract rises in the past with ISP’s, they tend to let me either leave or renegotiate which is fine.
My issue is with mobile, it’s always extremely difficult to break out of which I find the most depressing as you always keep seeing newer better deals.
The point here is most providers have realised that others don’t allow it, and have changed their contracts.
Biggest one really here has been VMO2, who have changed all new contracts that the increase is baked in and you won’t be allowed to reneg, next time.
The article should really mention that for Openreach services, now cost controls have been removed, have noted thet RPI increases will apply.
Expecting an Openreach CP to commit to this is hard given that and the only way around that would be to inflate the initial price to create a buffer for any predicted increase. This in itself means the end user could pay more over the full term than have any RPI increase passed through within term.
Yes, initial package prices would rise a little, but then competition acts as a break on abuse and all ISPs would now be holding to the same rule. One way or another, whether mid-contract or not, supply side rises will always be something that ends up being factored into the package price. But the risk should be on the ISP to find the best balance, just as it is with many other contract services.
I think that the solution is quite simply to remove all and any discounts. Every customer pays the same price, and the prices are that of which gives the company a profit per month.
If BT needs every customer to pay £30 a month to be profitable, then lock it to 32-33, this gives way for profit + to cover any random charges or inflation.
Will providers be expensive? Yes. But at least you’re getting the service you pay for and the company is profitable which, in a normal world — means better service
Or in other words AAISP…
But….the fact that AAISP, Aquiss and other don’t do this is a useful point of differentiation for those companies. If some clumsy, slow moving dinosaur of a regulator forces the big companies to offer fixed price contracts (and indeed 12 month terms), then it encourages the complacent to stick with the big companies and endure the other ways they treat customers, and the smaller companies will suffer. meanwhile VMO2 and their mates will find other dubious ways to exploit their customers.
Competition exists, it works. But I must say that I object to Which (who I’m a subscriber to) demanding more regulation to protect the complacent. If competition doesn’t work, then let’s do away with it, then we can all be with BT, on terms the regulator decides.
There is an “edge case” that vulnerable customers are disproportionately affected by unfair terms, but that can be handled separately by the regulator, rather than the blunt instrument interventions Which seem to want.
@Andrew G. Aquiss have one of the heftiest mid contract price rises out there with prices doubling midway through the 12 month contract.
@FibreBubble – Aquiss do quite clearly promote this as an “exclusive online offer price”, and are very clear in showing what the price is for the first 6 months and then what the price will be thereafter.
It is a very greedy and scummy practice to arbitrarily increase a contracted value by 15%
So yes it should very obviously be banned
Not to mention that fibre barely consumes any electricity and as such is virtually unaffected by inflation, unlike the chicken farmer who has feed, light, water and heat all inflated. Companies do this out of pure greed
Even businesses got hit with 15% + VAT this year. and that ain’t no joke at £700 a month already for example
The companies have staff to pay and equipment to buy which absolutely is hit by inflation. I agree though that the contract price should be the price for the contract term, and if companies feel unable to estimate future economic conditions then they should shorten the contract lengths to a duration that they do feel able to forecast to.
There is no equipment. You pay your router on your install.
Agree, John. As long as you only care about connecting to your local exchange and going no further of course, and if it goes down it stays down as no support.
Quite a bit of equipment consuming quite a bit of various resources involved in getting from that exchange to the wider Internet where the content actually is.
Quite a number of people working together to support that equipment, all of whom have bills to pay that increase with inflation.
Are you suggesting the only thing that goes in to running an ISP is the electricity to keep the fibre lit?
Dear me…
Openreach makes >£20 Billion profit a year, mainly thanks to OFCOM protecting its position within the market.
Whatever income Openreach says its needs from a FTTP circuit to remain profitable, it ain’t true.
Companies are allowed to make a profit?? or are they having to become a charity for the lefties
This isn’t about politics.
This is about Openreach being allowed to continue having a commanding position over the industry and the other companies that work within it.
Which benefits BT Group and BT Group alone.
So what do you suggest? while we are at it lets get rid of the big supermarkets (because of their commanding position over the industry and the other companies that work within it) and all go back to shopping at our local corner shops who typically only use their under-aged children to work in the shop. Does that also sound good to you?
Supermarkets have all developed their own supply chains. The items they package and sell at retail are sourced from various growers and wholesalers. Making their situation completely different to Openreach’s situation and simply not comparable.
Not sure where you got the figure of £20billion profit pa considering OR’s quarterly revenue hovers around £1.4billion. So £7billion revenue pa… we then need to deduct expenses, pensions, salaries etc.
If you can’t be honest with your opening statistic then it doesn’t matter how valid the rest of your argument is… I’ve lost all trust in you.
Forgive me, you are entirely correct. I have not worded my response well.
The number I quote is a very rough total for the entire BT Group from a few years ago, and honestly not one I have researched recently on Companies House.
Well when you spend taxpayers money and none of your own…
FYI Openreach Normalised free cash flow for FY 2022/23, £221 million (page 48 of 52 page 2023 annual review).
https://www.openreach.com/content/dam/openreach/openreach-dam-files/new-dam-(not-in-use-yet)/documents/regulatory-compliance/Openreach-Annual-Review-2023%20online.pdf
@The Provisioner – Looks like you stretched the truth to justify your skewed opinion, never mind we are all friends here.
@ Sid: The finest response I’ve seen in a long while!
>>The number I quote is a very rough total for the entire BT Group from a few years ago
No it’s not.
From what I remember this CPI+4% price hike per year was only suggested by Ofcom for the 40/10 FTTC tier with the sole intention to allow providers to sell it as cheaply as they possibly can to customers during the pandemic. For the ISPs to then incorporate it on every single tier and keep it going is them just ripping customers off and adding so much confusion.
@Anthony – you’re suggesting that it was actually Ofcom than came up with the CPI+4% annual price hike model…?! I don’t recall this at all!
So who was it that suggested CPI + 4% for FTTC 40/10 to keep the prices down during Covid?
Where companies have a monopoly or there is no other choice the out of contract price should be looked at. An example of which is Gigaclear where £20 ‘buys’ you 500mb and outside it is £50. Granted there is the cost of build and they go to really rural areas but at the end of the contract they price people out of the service. Maybe the CPI+4% Would be better in this case as they have a monopoly. Maybe…
But when you are out of contract you (technically) have a choice to go elsewhere. These companies are adding this whilst in contract and you just have to take it off them and you cannot leave. It is a disgusting practice as next to nobody knows what CPI is.
@Anthony – Thats no excuse as you should know what CPI, RPI and CPIH are. These indexes have a massive affect on peoples financial lives so if you don’t know please start reading up on them.
No ifs no buts.
@Sid. How about you stop the sanctimonious preaching that people should know what these indexes are? Even if people are familiar with them, at the time they sign up they don’t know what the value will be in twelve months time. Big businesses have a far better idea of how inflation will play out because they pay people to do economic forecasting, so they should set fixed prices for fixed term contracts.
@Anonymous – People should know about things that affect their financial lives, its no different than being stopped by police in a 30mph zone while doing 70mph and saying sorry I didn’t know what the max speed was.
To many people these days not taking responsibility for themselves but expecting ‘others’ to do it for them and you are complicit with your excuses.
I agree there should be no in-contract price rises.
@Sid The problem is not “what is CPI”; the problem is “what will CPI be in 10 months and in 22 months, given that I’m committing for 24 months, and the annual price rise is in 10 months time”. For good financial planning, if I’m committing to paying you for 24 months, I need to be confident that I will be able to afford the sums that I’m committing to.
This doesn’t work with “CPI + 4%”; I’m committing to being able to pay a larger sum in 10 months, and in 22 months, but I don’t know what CPI will be in 10 months time, nor in 22 months, and thus I have to hope that if CPI is high (say 10%) my employer will be willing to give me a 10% pay rise. If they won’t, then I’m simply stuck.
It’d be a very simple change to get out of this – instead of “CPI + 4%”, say “the lower of CPI + 4% or 10%”. Then, I need to budget for a 10% rise on the annual rise dates, and if CPI is lower, I’ll luck out. But instead providers go for the option that gives the provider certainty (long contract, price rises tied to CPI) at the expense of the consumer (who is asked to shoulder all the risk of high CPI).
By that I mean £20 then add CPI+4% to at least keep it affordable….
I think in any area where less than 2 ISPs offer the full 1 Gbit speed there should be a price cap. Companies like Virgin are abusing their monopolies; they don’t even have a published price for their products except for new customers.
@John – So should we apply your ‘price cap’ logic to everything, your local shop, petrol garage, Ferrari dealership and basically everything?
Hidden price increases by sky/now broadband.
Not only inflationary headline price increases are being applied but guaranteed speed levels are being reduced substantially, thus users are paying up to circa 20% more on top of the headline contract price.in addition I recommend users monitor closely the speeds supplied during 14 day cooling off period to those provided afterwards which are tuned downwards to the minimum levels and lower than headline speeds advertised.
Utter rubbish!!
About 8/9 years ago I signed upan elderly neighbour with PN for Broadband/phone for approx £22/month
He wanted to go onto Fibre so I looked at his account, to find in horror he was paying £59/month due to annual hikes.
A speed check revealed download speed between 7 -10Mb/s
GigaClear had just layed fibre in the road so we switched at £17/month
So sad for the elderly neighbour, but do people not check their bank statements these days?
ISPs should not be increasing prices mid contract. Why should I be locked into a contract with unknown prices rises in it, it’s simple really if the ISP can’t make a profit on my contract and priced it too low I should be free to leave if the ISP needs to increase their price.
It’s crazy you can sign a contract in Feb then face a 14% increase just over a month later.
The large operators are effectively colluding to monopolise their dominant market position.
Perhaps OFCOM should look to force the largest operators to split back into a larger number of smaller competitive suppliers and get the market to operate in favour of the clients and not be monopolised by a few large suppliers.
If you agree with Which you can sign their petition https://www.which.co.uk/news/article/upcoming-mid-contract-price-hikes-could-see-customers-pay-150-extra-for-their-broadband-deal-aUk2W1G7u9LX
The big problem with mid-contract price rises is that you’re committing to an unknown rise – you simply do not know, at time of signing a contract, what CPI, RPI or other indexes of inflation will be at the time an “inflation + X%” rise applies. Most of the time, they’re not high, because the Bank of England is under orders to use monetary policy to hold CPI at around 2%, but recently, they’ve gone unexpectedly high – as much as 11.1%.
At a minimum, to keep sanity, the price rises should be limited – instead of “inflation + X%”, the contractual should be something like “no more than the lower of inflation + X% or Y%”, so that I can use Y% for my planning and know that I’ll be OK with the mid-contract rise, even if CPI jumps again (e.g. to 12%).