Ofcom UK Approve Plan to BAN Some Mid-Contract Broadband Price Hikes UPDATE2
The UK telecoms regulator, Ofcom, has today finalised their earlier proposal to BAN phone, mobile, pay TV and broadband ISPs from doing mid-contract price hikes that are linked to inflation and percentage changes. The plan is to introduce this change from 17th January 2025, before the next round of annual price increases typically hit.
Back in 2020 most of the major providers preferred to announce a general price increase each year, which usually averaged around 4-6%. But that changed after BT adopted a key policy and now almost all of them (except Sky Broadband) increase their prices each year by nearly 4% plus the rate of annual inflation (CPI or RPI) – as published in a particular month (usually January or February).
Initially, the change wasn’t such a problem because inflation remained low, but it’s been far from low over the past couple of years. In 2022 most consumers saw their prices rise by around 9% (here) and in 2023 that hit over 14% (here), although falling inflation meant that the hikes for 2024 weren’t quite that and were closer to 7-8% (here). But these weren’t the only problems with inflation linked price hikes.
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The policy also made it harder for customers to exit their contracts penalty free because the providers could argue that they’d already given prior notice of the increases in the small print. On top of that, many consumers found the policy confusing (e.g. not being familiar with how “inflation” actually works or the meaning of terms like CPI or RPI).
The Intervention
The regulator arguably took too long to respond to the concerns, but their review eventually found that consumers have “low awareness and understanding of inflation-linked price rises” and are “unable to estimate reliably what they will pay”. Ofcom also found that people do not typically consider future inflation-linked price rises when choosing a contract.
Ofcom said more than half (55%) of broadband customers and pay monthly mobile customers (58%) do not know what inflation rates such as CPI and RPI measure. And of those who are with providers that use inflation-linked price rises, very few broadband (16%) and mobile customers (12%) were both aware of the price rise and able to identify that it was inflation-linked with an additional percentage.
In response, the regulator announced a proposal in December 2023 to “effectively ban” the practice (here). Instead, wherever telecoms or pay TV providers apply in-contract price rises they must now “set these out clearly and up-front, in pounds and pence, when a customer signs up“. Put another way, providers would be able to present their monthly subscription price (e.g. £30 per month), but any mid-contract price hikes must be spelled out alongside and include the dates when they will become applicable.
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“Providers must draw this information to the customer’s attention prominently before they are bound by the contract, in a clear and comprehensible manner (including during a sales call or other verbal sale such as an in-store sale) to enable them to make an informed choice. Providers must also set out when any changes to the monthly price will occur,” said Ofcom’s statement.
Ofcom has spent the past few months consulting the industry on these proposals, and they’ve today announced their intention to adopt them into their rules (General Conditions). The announcement confirms that the regulator will formally begin to enforce this change on the market from 17th January 2025.
Some providers, such as TalkTalk, complained that the move was unfair because Ofcom hadn’t applied the same rules to wholesale providers – they singled out Openreach as an example. But unlike retail providers, Openreach don’t do the CPI + X% model (usually they just do a pure inflation increase) or apply such changes mid-contract. Likewise, it’s not as if other providers (e.g. smaller players) don’t have to deal with variable supply side costs already, yet many of them still manage to avoid mid-contract hikes.
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Cristina Luna-Esteban, Ofcom’s Telecoms Policy Director, said:
“With household budgets squeezed, people need to have certainty about their monthly outgoings. But that’s impossible if you’re tied into a contract where the price could change based on something as hard to predict as future inflation.
We’re stepping in on behalf of phone, broadband and pay TV customers to stamp out this practice, so people can be certain of the price they will pay, compare deals more easily and take advantage of the competitive market we have in the UK.”
The change will naturally increase the risk for providers that typically adopted the CPI/RPI + X% model to annual hikes. But providers still have to balance that higher risk through their pricing, which could well result in bigger price increases to compensate for greater uncertainty (the longer the contract term, the greater the uncertainty). So none of this will make services cheaper, only clearer. In some cases, it may even make them more expensive than the old approach.
Some providers, such as the BT Group ISPs (e.g. BT, Plusnet and EE) and Vodafone, have already responded to this by introducing a flat £3 per year increase on broadband and a c.£1-£2 increase on mobile. Such a policy is much clearer, but it doesn’t scale well across differently priced packages (i.e. those on entry-level services will be hit harder) and is unlikely to damped calls for an outright ban on mid-contract hikes – something we’d support.
Speaking of which, if service providers can now predict their increases ahead of time, then it arguably increases the case for just baking those planned hikes into a fixed price contract. At this point it’s worth remembering that not all providers adopt the same approach as the biggest players and many smaller ISPs, particularly newer alternative networks (altnets), often already promote packages with simple fixed price terms.
Finally, Ofcom’s changes only impact new or recontracting terms, which means that existing customers will need to change (or re-contract) their current package in order to be covered by the new policy. The change is also only applicable to price rises that apply to the “Core Subscription Price“, which means that charges for add-ons (out-of-bundle) and calls can still adopt the existing or a different approach (this could make things confusing).
We should also remember that, over the last five years, average prices for broadband and mobile services in the UK have actually fallen in real terms (Ofcom’s data). At the same time, companies have been investing in upgrading their networks, with availability of full fibre increasing tenfold and average speeds and data use doubling.
UK telecoms markets over the last five years (2023 prices)
| 2018 | 2023 | |
|---|---|---|
| Average superfast broadband bundle list price | £48.71 | £42.28 |
| Average monthly mobile price, excluding handset costs | £17.12 | £11.51 |
| Full-fibre broadband availability | 6% | 57% |
| Median average fixed broadband download speeds | 37.0 Mbit/s | 69.4 Mbit/s |
| Average monthly household fixed broadband data use | 240 GB | 535 GB |
| Average monthly mobile data use | 3.4 GB | 9.8 GB |
Statement: Prohibiting inflation-linked price rises
https://www.ofcom.org.uk/../review-of-inflation-linked-telecoms-price-rises
UPDATE 12:02pm
The ISPs have been surprisingly quiet on this change today, but we have had one pro-active comment from Cuckoo.
Sarah Howells, Managing Director at Cuckoo, said:
“This ban from Ofcom is long overdue, and we welcome the move, however at Cuckoo we’ve taken this one step further. Yes, bringing more transparency to these increases is key to avoid consumer confusion, but at Cuckoo we’ve never raised prices mid-contract.
Mid-contract price rises are a tactic that the big six broadband providers have been using for years, leaving customers confused and shortchanged.
Major providers are still squeezing consumers unfairly. While a number of brands have moved to comply ahead of the Ofcom guidance by clearly communicating their mid contract price rises in ‘pounds and pence’, at the end of the day they are still raising prices mid-contract, and these increases will differ depending on who your provider is.
Imagine you buy a ticket for a football match, but then at halftime you’re told you’ll have to pay more to watch the second-half – and then you’re fined if you want to leave.
As an industry broadband needs to be more transparent, more customer focused and fairer. It’s something we’re striving to do at Cuckoo. Today’s Ofcom ban is a welcome step in the right direction, but mid-contract price rises are bad full-stop.”
UPDATE 1:06pm
We’ve also had a comment from city-focused full fibre ISP Hyperoptic.
Dana Tobak, CEO of Hyperoptic, said:
“Having campaigned against unpredictable mid-contract price hikes for over two years, and with the cost of living still hitting people hard, we are delighted to see Ofcom take a firm stance on the issue. This is a huge step towards a fairer, more transparent broadband market, which will help to protect millions of customers from unknowingly being locked into contracts that surprise them with an unavoidable price rise after a few months. Hyperoptic prides itself on being in the corner of customers, offering hyper fair and transparent contracts with no mid-contract price hikes.”
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, BlueSky, Threads.net and Linkedin.
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Ofcom are ineffective. EE now has a £1.50 annual price hike, which on their £9/month 20Gb plan works out at 16.67% and Vodafone has a £1.80 annual price hike, so on a £10 plan this works out at 18%. The % increase only becomes comparable to the current CPI model if the phone contract is above £26 or so. So now cheaper plans are disproportionately impacted.
What Ofcom has implemented has made the situation worse. What does Ofcom actually do? They should be ashamed. Mobile and broadband monthly prices should be fixed for 18/24 months – consumers fix their mortgages for 2/3/5/10 years so why can’t the MNOs and broadband companies?
So now you have a choice. Pay EE £9 per month for 20GB of data with well defined annual price increases, or pay (e.g.) 1pMobile £10 per month for 25GB of data with no annual price rises. The fact that the annual price increase is clear at the start of the contract is a good thing.
There isn’t really a choice though is there? We’re yet to see what O2 and Three do but Vodafone and EE/BT/Plusnet have essentially copied each other – if a consumer wants a deal directly with a MNO there isn’t much differentiation. As I said, the fixed price increase move is better if you have a phone contract North of £26, but completely disproportionate for lower cost SIM only deals. It’s unreasonable – they know their costs over 24 months – if they don’t they shouldn’t be in business quite frankly.
I hope O2/Virgin scrap the price rise policy and go against the norm (like with roaming) because it might put pressure on the other players to stop doing price hikes altogether.
> EE now has a £1.50 annual price hike, which on their £9/month 20Gb plan works out at 16.67%
If you choose to use the monthly price to calculate the annual percentage change, then yes, you will end up with that silly figure of 16.6%, rather than the less exciting 1.4%.
What is the percentage increase of £9 to £10.50? Or £10 to £11.80? You appear to be implying I’m misrepresenting the % increase.
The only thing that matters is the total cost of the contract over the contract period. Now it is known in advance what that will be, before it was not. If you say they can’t change the amount you pay mid-contract then they will just spread the same total cost over the whole contract period. Raising the amount you pay mid-contract is not really a price increase, the price is the total cost of the contract which is agreed at the start, the rest is just the payment plan. The main problem with this market is that in some areas it is highly competitive but in others there is only one service provider. Ofcom are not really addressing these localised-monopolies and lack of pricing competition.
@DD: “…they know their costs over 24 months – if they don’t they shouldn’t be in business quite frankly.”
Exactly this. Ofcom should have just “banned” any price increases in contract.
This would have been the best thing for consumers and wouldn’t make any difference to operators.
It might even have increased competition by stimulating shorter contracts!
@John: “If you say they can’t change the amount you pay mid-contract then they will just spread the same total cost over the whole contract period.”
That sounds perfect!
There’s no excuse for the incontract price hikes, dont get on fixed contracts elswhere, consumer wise, finance agreements, enegy, mortgaes etc. Its just consumer exploitation and a pathetic consumer snoozedog.
As for smaller outfits doing the decent thing and fixing the price for the contract, they just end up being squeezed by the big boys, which is not fair competition, and is replicated by whats been seen with so called competitive markets for energy, how have consumers benifited there at all.
I remember when on large IT service contracts there was a yoy cost reduction – as we should be gettign more efficient, reducing overheads etc, so benefiting the client.
So Ofcom where’s your lead wiht this for consumers and economy of scale? Plays right back to having a single service for the nation at cost + maintenance and devolpment where needed, gets rid of loads of wasted costs, CxO’s, ofwos, borrowing %, shareholders and so called ‘governance’ overheads, these cost reduction can then be put into the maintenenace and develpment costs or even consume costs reductions through standardisation (simplification, removal of duplication etc) and scale. And inconvenience, dont need n number of companies digging up the roads for each ‘proprietary’ network.
Providers still have the option of offering a 12 month contract and no price rise until renewal choice is made. That would be on a continual 12 month cycle, so they’d be able to start recouping increased costs earlier, rather than in some cases waiting 11 months before they can increase the price.
I think on a 24 month contract I’d be happier paying £1.50 extra a month than a £3 a month rise in year 2.
@Just a thought: “I think on a 24 month contract I’d be happier paying £1.50 extra a month than a £3 a month rise in year 2.”
Exactly
This is an intervention which has hurt the interests of consumers. I have written to my MP and would urge others to do so. I signed on with Plusnet and just managed to get their inflation plus 3.9% deal. If inflation is under 3% next year I will see my price rise by no more than 6.9%. However, the new additional charge of £3 a month designed to give price certainty introduced from this week means people will pay 12% on the 145 Mbps service. ISPs should be banned from any mid-term price hikes unless they allow consumers to ditch their service mid-term without penalty.
Exactly this – the defined fixed price increases are actually higher than the previous CPI + 3.9% policy. Ofcom officials should be ashamed – they have achieved nothing and made it worse. A toothless regulator.
This is a problem caused by the providers’ implementation, nothing to do with Ofcom’s rules. They’re perfectly free to have the increases actually be a percentage of the price, they just have to advertise it as a monetary value.
Instead the providers have just been lazy and specified a fixed increase regardless of contract price, which just hurts the the poorer parts of society.
The level of outrage seems to be inversely correlated with the level of comprehension.
> The plan is to introduce this change from 17th January 2025, before the next round of annual price increases typically hit.
seems to contradict
> Finally, Ofcom’s changes only impact new or recontracting terms
I’m afraid it’s (probably) not a contradiction. Providers have six months to continue signing customers up with false advertising. And then even after six months, customers will be locked in for the length of their contract, which is up to twenty four months.
How does any of the above apply to someone taking out,say,a Sky TV contract today?
When I asked Sky to provide me with a link to their ts and cs, CS refused. I found them on Sky’s website but they still referred to 12/18 month contracts.
It wouldn’t have any impact “today” because a) the change won’t be enforced until Jan 2025, and b) Sky were one of the only major providers not to adopt the inflationary hikes model in the first place. Instead, Sky tends to do static annual hikes, which they don’t spell out via specific figures ahead of introduction in their terms. But they will need to tweak their policy sooner, rather than later, to adapt.
Many providers now offering without that mid-contract rises… .
I have now vDSL broadband from IDnet, no increases. Mobile phone from Smarty, also no increase… . So on. So why choose that companies who increasing randomly prices?
Need to switch away from them and then they will have no choice do discard mid-contract raises.
Why they was in first place? It’s simple rip off… .
Business contract at work – fixed cost for the term with no increases, ISP takes the risk.
Consumer contract at home – cost can increase over contract, I take the risk.
Bonkers.
Indeed, it’s bonkers how much consumers have been left to suffer bad contracts and false advertising.
ISPs are more than capable of calculating their desired revenue over the contract, and dividing by the length of the contract.
Comparison websites usually have a “sort by average monthly price”; at least this can be accurately calculated now. Previously they subtracted cashback but didn’t add inflation linked price rises.
My salary does not rise with inflation, and the cost to connect me is already 0 since I’m already connected which makes hiking prices mid contract pure greed scum moves
Well done on all operators that dont milk their customers like cash cows like Hyperoptic and Youfibre
Is it legal for Sky to say prices can only increase by 10%, but in the smallprint say the percentage is calculated against the current full retail price of your TV package. So I was hit with a 15% increase several months ago on the price I was paying, but they then said ahh but we state the percentage increase is calculated against the full price – not your discounted price. So the £6 increase was only 8.9% when calculated against the full price I would never agree to pay. That seems pretty dodgy and certainly sleezy.
It didn’t really matter as I exited my contract penalty-free anyway under a separate clause. So they not only lost out on the price increase, but also my entire monthly subscription fee. Since then, they’ve been begging me to comeback with several calls every month and letters in the post. I don’t tell them to stop because I know it’s costing them money everytime. 🙂
As I see it they should be required to advertise the average monthly cost for the contract term prominently alongside all contract prices. There are too many of these “half price for six months” (on a 24-month contract), annual price rises, etc and they often try to hide these by acting as if it’s a normal price reduction (I’ve noticed a particularly egregious case of this on EE’s SIM only offers recently).
Call it something akin to the tariff comparison rate we have on electricity.
Ofcom really are doing such a poor job recently, Having a fixed price of £2 a year increase means customers spending less per month are proportionally charged more in the price rise compared higher spending customers. e.g. the less well off are proportionally hit hard by this change at least CPI+3.9% has a equal distribution.
There sending UX designs for desktop when 70% or more of online sales happen on a mobile not desktop screen how are ISP companies supposed to get all this information on a mobile screen in a format that customer one actually notice.
No instruction around how this would impact offline sales by field agents or telesales teams?
When UK inflation get back to more long-term averages 2-3% these fix price rise are going to more than CPI +3.9% for many customers
This seem to be short term reactions to higher inflation when they just could have said there now a fixed cap of X% price rise per year or better banned mid contract price rises all together.