85 Percent of UK Says Mid-Contract Telecoms Price Hikes are Unfair
A new Opinium survey of 2,000 UK adults, which was commissioned by Uswitch, has today claimed that 85% of broadband ISP and mobile customers view annual price rises as “unfair” and 87% think they should be allowed to leave their provider penalty free if they raise prices mid-contract.
Price rises are an often-unavoidable part of service delivery these days, although the new survey was specifically focused on mid-contract increases by providers that adopt the policy of raising their prices each year by up to nearly 4% + the rate of annual inflation (CPI or RPI) – as published on a particular month (usually January or February). Last year this resulted in broadband and mobile consumer being hit by average hikes of around 14%.
Most of the major operators have now baked the aforementioned model of annul mid-contract increases into their package terms. Under Ofcom’s current rules, this approach makes it difficult for customers to exit their contract penalty free, since they’re deemed to already be aware of the future hike – even though customers cannot accurately predict what inflation might be in the future and many don’t even understand it.
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According to the new survey, not knowing the value of the potential price rise is the biggest cause of concern for 40% of consumers, and 62% of respondents said they would leave their provider at the next available opportunity if hit by a price hike. But in reality, we don’t see any evidence for that level of movement, with annual switching tending to be closer to around the 10-20% mark.
Some 71% said they would switch to a provider who didn’t have mid-contract rises if given the choice, with 20% citing no price rises as a top priority when choosing a deal, along with reliability (57%) and overall cost (48%). Finally, 75% said they would be put off from taking on a new mobile or broadband contract if it had mid-contract hikes baked into the terms.
Nevertheless, there’s often a stark difference between what people feel (say) in surveys like this and what they actually do. In reality, most consumers take a package from one of the largest players and almost all of them, except Sky Broadband, currently adopt the same model. But even Sky still does annual price rises, albeit to a less aggressive level. Many smaller providers do keep prices low, but issues of brand awareness and network availability can hinder adoption.
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%). Ofcom are currently reviewing the problem (here), but it remains uncertain whether they will go as far as to ban the practice.
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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 this is not a ban, and those changes won’t be enforced until the end of this year.
The hope of many is that Ofcom will either ban mid-contract hikes or, at the very least, force providers that introduce such rises to offer customers a penalty free right to exit their current term. The latter would mark a return to how the market operated before the CPI/RPI + X% model became widely adopted, with almost all of the major players choosing to mirror BT’s lead.
Sadly, the possibility does exist that the regulator may simply require providers to be more transparent with their pricing, which may consumers would likely view as being a cop out by the regulator.
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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Totally unfair, the price you initially paid for your contract should remain the same throughout the contract length. I hope changes are made.
Agreed. I once got a 15.5% increase on an already expensive service. I managed to get the price frozen for the rest of the contract and in the end I dropped them as cheaper services become available but since then I have never done a contract on anything I use service wise. Everything is 30 days so I don’t have to put up with price rises
Agreed!
It is certainly unfair if new customers are then offered lower prices than in contract customers. A lot of customers simply don’t hassle of changing providers which in the FTTP age becomes even more hassle. At least in the days of ADSL/VDSL it was a case of plugging in a new router on changeover day, now if the supplier is an altnet or provisions via an altnet it will mean a whole new installation as well which may well mean that customers are even less likely to change than before.
It seems to have Virgin Media alright for what 30 years?
I agree in terms of new and existing customers. Its not right to put price up for existing customers, but keep it the same for new.
On the other hand if you enter s contract with defined increases (ok not super clear as who knows what RPI will be in April) the ISP should be able to do it. In an ideal world customers would vote with thier feet.
I expect most surveys asking about price increases will come out as unfair,much like a vote of turkeys and christmas
It is completely disingenuous to conflate the two things when they have nothing to do with each other
One creates healthy market competition
The other is literally an infinite squeeze of a cash cow at no extra benefit
Of course it’s unfair.
A contract is an agreement between two parties, so that each party knows exactly where they stand.
What’s the point in a contract if if can be changed at any moment?
While I disagree with mid contract price increases and that you should be able to leave penalty free if a price change occurs, the contract that you agreed with does say that there will be mid contract price increase – so there’s no change in the contract?!
I think if the ISPs are truly concerned about inflation, they could just introduce 12 month contracts with slightly higher fees.
Sky does this with Sky Stream, where you pay a bit more for a 31 day rolling contract vs an 18 month contract.
Why would a shorter contract have higher fees? I would expect the shorter contract to have lower fees, because the price can go up at any time (as opposed to a longer contract with a fixed price). This assumes that mid-contract price increases are banned, of course.
The main issue I suspect is you do no pay for uninstallation and activation. The 18 month contract covers that
The way around that would be to have a 1 month contract but you have to pay for installation and activation. Would anyone find that an attractive option though ?
Sky Steam is weird. It says £26 a month for 18 months but then also £26 a month for 18 months 31 day term. I am on the latter. SO I think the latter is saying the price will stay the same for 18 months and you can leave with 30 days notice. I got in before they changed the hardware to rental so I own the box but it’s useless without a Sub anyway.
My new ISP is £50 a month for 18 months but even after that contract is us it has a 3 year price guarantee that they are very upfront about so there is 0 confusion
@bob
The way around that would be to have a 1 month contract but you have to pay for installation and activation. Would anyone find that an attractive option though ?
Many ISP’s AAISP, Pulse8 and many others offer 1 month contracts with upfront fees. And they do quite well so it’s a proven model. It also makes sense to both parties
@Ben
I based my post on what I’ve seen elsewhere and tried to be realistic with my expectations, for example, Vodafone offers me 910mbps for £36 with mid-contract rises on a 24 month contract whilst Aquiss offers 12 months for an average of £41.25 (first year due to a 6 month half price offer, £55pm thereafter).
I’ve similar things elsewhere like mobile contracts, where the longer the contract the cheaper it may be per month (at least initially, subject to any price rises).
There are some ISP who provide the option of paying the activation fee or contracting for a certain length and it’s waived e.g. Cuckoo, but they may also still cost more per month.
My suspicion of why they did this is likely due to things like the activation fee or because of how revenue/profit averages out for the company with the different length contracts, especially with mid-contract prices rises, although not everyone does this. At the most cynical, by having that higher price it incentivises users to sign up for the longer term contract.
@I love Starlink
On Sky’s website it’s telling me Sky Stream is £26pm on an 18 month contract or £29pm on a 31 day rolling contract, excluding their first month free offer.
We can look to other markets and see a different way of doing business though. For example, a “fixed” energy price is typically more expensive than a “flexible” one on day one, because the “fix” protects the consumer from price increases. Of course, the cost of supplying energy is much more variable than the cost of supplying internet…
@I Love Starlink have the new ISP connected you already? Outside the 14 day window to cancel or if it ends up being a bit weird still stuck?
Whilst I don’t particularly like mid-contract rises I understand that inflation can cause a provider’s cost to increase. It seems only fair that this increase is passed on to customers in some form.
What I strongly disagree with is the way they bake in price rises of CPI+X%.
I have never understood the justification for an X% above the rate of inflation increase. An increase in your monthly cost by the inflation rate seems fair but the additional X% is not.
The solution to this is pretty simple: reduce the contract length so that ISPs don’t feel the need to include mid-contract price increases.
“An increase in your monthly cost by the inflation rate seems fair but the additional X% is not.”
Your argument does not justify applying a full year’s CPI or RPI on contracts that started less than a year ago. The only reason for doing that is to make the contract appear cheaper than it really is.
The CPI part of the increase would be more justifiable if the first year’s CPI were applied pro-rata based on the length of time since the start of the contract (with contract renewals counting as the start of a new contract for this purpose).
I joined one network in a February and got a CPI+3.9% 6 weeks later, that is criminal. I thought I had joined after the cut off for the increase, but the cut off is 1 month before the increase.
Maybe Ofcom should introduce a maximum % that a contract can rise by before an automatic right to cancel your contract penalty free. Say 6% which would reasonable under normal inflation.
Having said all that I disagree with midcontract rises in principle but I doubt Ofcom will outright ban then but my above idea is a reasonable compromise.
Mid-contract price hikes can only be applied if you agreed to them in the first place. As per EECC, customers receive a contract summary before confirming the purchase, which, if acting in line with regulation, advises of what price increases are/aren’t baked in to what you sign up to (usually CPI).
Anything outside of that, customers are able to leave their contract without penalty.
We may not like price increases, but if you’ve signed up to them, and it’s been made clear at the point of sale, you can’t say they’re unfair, really.
You’re right that the customer sees the terms before signing up. However, given the increase happens on the same month each year, depending when you sign up, you could hit with one or two increases in your contract.
I guess the main gripe is that it’s not really fixed if there is an unknown variable of cPI or RPI in the mix. Also people often don’t equate 3% to the actual monthly cost.
Maybe a 24 month contract should say something like “£27 for the first 12 months and £31 for the last 12” giving the required tie of 24 months to pay for router set up costs etc, but being 100% clear in the actual cost?
The biggest ISPs seem to only push 24month contracts with price rises each April… so 2 price increases during the contract for most.
“Which?” have started a campaign that seems to relate both broadband and mobile contracts,
https://www.which.co.uk/news/article/upcoming-mid-contract-price-hikes-could-see-customers-pay-150-extra-for-their-broadband-deal-aUk2W1G7u9LX
But it’s been running for a while and hasn’t attracted that many signatures.
Contract terms eg: 12 or 24 months should be fixed price during your contract end of! No excuse!
The real issue is OFCOM being too weak to block the dropping of 12 month contracts. By all means allow 2 year contracts but not at the expense of a 1 year option.
OFCOM is a government quango first and a regulator second. Remember a good proportion of MP’s have shares in these companies, so increased prices to consumers means increased dividends.
If a Bank can lend hundreds of thousands of pounds for 2, 3, 5 or 10 years at a fixed %, is it unreasonable to expect a mobile or broadband provider to know their costs for 12-24 months? What kind of business doesn’t know how much it costs to provide services for up to 24 months? To reiterate the comments above, it’s frustrating for a company like BT/EE to increase the price of the contract in April yet offer new customers a £30.99 deal the same month. The same companies also have a clause that states if there’s deflation they won’t decrease your monthly price – is that fair? The practice needs to be banned.
Fully concur.
Imagine if these companies would like the customer having a clause to “reduce the amount that will be paid by the CPI rate + 3.9% or if CPI is zero, then by 3.9%”
The point of a contract should be to create certainty to both parties. In this case, the business is guaranteeing itself a customer and a predictable revenue stream at a fixed price, and the customer guaranteeing himself a service for a fixed price.
This practice of increasing a price during a contract should be banned for both mobile and broadband providers. Contracts of 12-24 months should be fixed. 12 month contracts should be an option and 30 day rolling too as far as possible.
If it were some type of long term lease for 10+ years, that would be a different matter. Basically these businesses are getting to increase the price for a relatively short contract in business terms by around 4% and playing by a different set of rules when it comes to inflation. Whereas most other businesses and customers don’t get to have that legalised luxury and actually have to forecast costs and deal with whatever happens without any such safety net.
It’s not just BT of course. It’s most of them, and certainly all of the “large” providers.
Recently cancelled my BT contract as it was coming to end, reps on the phone insisted that not a single provider in the market provides contracts with no price rises mid-contract, on two occassions (call dropped the first time thanks to EE faults… contract ends with them soon as well!).
The small provider I’ve switched too is initially a couple of pounds more expensive over the retention offer, but with no inflationry rises, come March I will be quids in – also get a 6E router and a call centre just down the road from me in the process.
Maybe if these companies were more open with the actual figures their customers wouldn’t be as miffed about them? But then again, baking into you’re contracts an increase of over 10% annually isn’t going to go down well is it? Maybe its just pure unadulterated corporate greed yet again?
“Most of the major operators have now baked the aforementioned model of annul mid-contract increases into their package terms”
A Freudian slip typo? Given the article topic we secretly wish they would annul the practice…..
I don’t like these mid term hikes but I can understand going up with inflation BUT what is the extra 3.9% for? It should be inflation only!
It’s like the standing charge by energy companies: corporate greed sanctioned by the government, paid for by backhanders in the form of party donations so that bonuses can be paid under the pretense that it will be used for R&D. If that were true we would be world leaders in comms tech and we all know that we are not. In short – institutional corruption but of course, we are not allowed to say that…