CEO of Broadband ISP Zen Internet Calls for Ban of Mid-Contract Price Hikes
The boss of venerable UK broadband and phone provider Zen Internet, Richard Tang, has backed the Government’s Secretary of State for Science, Innovation and Technology (DSIT), Liz Kendall, in her alleged “call for an ‘outright ban on absurd’ mid-contract telecoms price rises“. But it remains unclear whether Ofcom will go that far.
The remarks came after the Government reacted angrily to O2’s recent decision to increase their annual mid-contract price rises beyond what customers agreed to when they signed-up (here). Ofcom said they were “disappointed” by the change, which went “against the spirit of our rules which are designed to ensure greater certainty and transparency for customers when they sign up” (here).
In response, Liz Kendall called on Ofcom’s CEO, Dame Melanie Dawes, to “look at in-contract price rises again“ and suggested that the regulator instead “consider the possibility of adopting a similar regime to those such as insurance, where new and existing customers need to be offered the same deal“.
Advertisement
Richard Tang, CEO of Zen Internet, said:
“I fully support Liz Kendall’s call for an ‘outright ban on absurd’ mid-contract telecoms price rises, and would urge Ofcom to seriously consider imposing such a ban. To do so would offer consumers the best protection and certainty over what they will pay.
It’s all very well saying that consumers have the ability to terminate their contracts early without penalty when they are caught by surprise by unexpected price hikes, but the telecoms companies know full well that only a proportion of people will take that action, particularly on the run up to Christmas.
At Zen Internet, we’ve never imposed mid-contract price hikes on our consumer customers. Following our “Happy customers” mantra, we believe consumers deserve the simplicity of having the same fixed price throughout the length of their contract. The approach works commercially – we’ve been doing it for 30 years and have grown every year. We also believe it’s unethical to impose massive price hikes when customers go out of contract – a practice adopted by most of our competitors.”
However, it is worth pointing out that Liz Kendall herself never specifically spoke the words “outright ban on absurd” mid-contract price rises, which instead seems to have been accidentally conflated with the entirely separate remarks of a commercial price comparison site via LBC (here).
Kendall did suggest that the regulator should “consider” whether providers could adopt a similar scheme to insurance companies, “where new and existing customers need to be offered the same deal“. But there are different ways of interpreting such a suggestion, including one that isn’t necessarily akin to an outright ban on mid-contract price rises – something we would also support as the simplest and clearest approach.
Zen naturally have a vested interest above in promoting their own virtues as part of this debate, but equally the more industry voices that speak in favour of such an approach, the better. At the end of the day, it remains to be seen what changes Ofcom will actually make, although we remain sceptical about the chances of them adopting an outright ban. History tends to suggest that they often favour compromise solutions.
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.
Advertisement
Leave a Reply
Privacy Notice: Please note that news comments are anonymous, which means that we do NOT require you to enter any real personal details to post a message and display names can be almost anything you like (provided they do not contain offensive language or impersonate a real person's legal name). By clicking to submit a post you agree to storing your entries for comment content, display name, IP and email in our database, for as long as the post remains live.
Only the submitted name and comment will be displayed in public, while the rest will be kept private (we will never share this outside of ISPreview, regardless of whether the data is real or fake). This comment system uses submitted IP, email and website address data to spot abuse and spammers. All data is transferred via an encrypted (https secure) session.
It is not a realistic option for a two-year contract, and it is lending support to the government’s efforts to control prices through red tape rather than address the root causes.
It is entirely realistic for 2 year contracts.
Inflation is under 4%. Just increase the initial price by 2% and keep the price flat for 2 years.
The issue is the like of VMO2 increasing my £7.50 line rental by £2.50 when I signed up for a percentage linked one.
I don’t like legislation, but Ofcom is an utter, politically biased failure and needs shutting down.
Then don’t sign people up to 2 year contracts then.
It is very reasonable, the ISPs are not forced to offer very long contracts, a ban would mean they choose between rapid price rises or security for both customers and themselves. right now the contracts are basically one sided.
@GG:
No it is not.
@Big Dave:
That would be a logical step, but that would also just lead to bigger price rises.
@greggles:
No it is not. I doubt you would be happy with the steeper price rises if mid-contract prices were to be banned.
@Far2329Light Maybe it would lead to higher prices but a lot of the rates on offer are probably unsustainably low anyway. We are in in the bizarre situation where loyalty gets punished & promiscuity gets rewarded & most people probably don’t want to be changing their broadband every 2 years. I just have (reluctantly) because if I didn’t BT would just be making a mug of me & now they are already offering better rates now that I have left – how ridiculous is that?.
@Big Dave:
In essence, that sounds like a complaint about reality.
In virtually any market sector, you will come across subsidies to acquire new customers. It is existing customers who fund those campaigns. It is existing customers who fund all of those marketing campaigns that are so critical to the linear TV business model. That is reality. It will only become more acute as regulated competition continues.
As to sticking with BT, I personally had no problems last year negotiating down the cost of my renewed contract. Why do you give up so easily?
Because frankly I would just as soon have teeth extracted as deal with a call centre & get screwed over by one of their agents. The case Mark highlighted with O2 recently demonstrates why.
@Big Dave:
So what is the point that you are trying to make?
I agree, ban mid contract price rises.
If ISPs want to put up prices, they can offer 12 contracts contracts and put prices up when these expire.
Absolutely this.
Also should be a fixed percentage increase if you wanted no contract.
The issue is too many isps slap you onto 24 month contract and if you want 30 day contracts you pay through the nose.
Could you imagine a world where providers had to fix prices for the entire contract? How would providers compete for new customers if they can’t offer silly low prices only to ramp them up a few months later.
Consumers would grumble that broadband got more expensive as they’re too naive to look at the overall contract price rather than the headline prices that they see today.
OFCOM banning percentage price increases only made lower speed packages more expensive as providers largely adopted £3 (now going to £4) price increases across all packages which turned into a bigger increase on cheaper packages than the old percentage based increases.
The elephant in the room is human psychology and the prioritisation of instant gratification. Only a small minority will pay £36/month for anything when the other choice is £32 now, £36 after six months and then the last few months are £40. (The £32 overrides everything else – who cares about paying £40, that’s 18 months away!)
Now, that small minority are also probably fairly intelligent. Certainly intelligent enough to be tech-savvy enough to frequent this site (or, indeed, become CEO of an ISP) but let’s not forget that they (we) are indeed a minority.
For the vast majority of people, the low introductory price is all that they focus on. I’m ex-broadband sales and retentions for a major ISP. I’ve seen first hand how people refuse to do the maths when offered, say, £34/month with 3 months free or £28/month for all of the 24 months of the contract.
Richard Tang wants to charge an average price instead of a low introductory price followed by increases? Yeah, good luck with that.
If they do impose a ban it should come with a “No Escape” clause for the providers so are forced to stick to the contract no matter what. Customers don’t get that privilege.
You would risk financial damage to the providers and to the market. One way or another, you would pay for any further restrictive legislation.
They wouldn’t care if their customers were in trouble, they would expect the customers to pay up, so as far I can see you think they should be allowed to get away with 1 sided relationships.
@Big Dave:
Every service contract will be dominated by the provider. You agree to their terms or sling your hook. If regulators try to manage that, providers will have to recover the costs in one way or another.
If Ofcom steps in with more regulation in this area, it will just further distort market pricing. Not only will the providers be hit, but their client CSPs as well.
Keep in mind as well that these bigger increases in charges are due to the mismanagement of the economy by the government, the ever-increasing costs of new government policies and the overregulation of the market sector by an agency that is trying to implement price controls via the backdoor. Such controls were shown to fail in the 1960s and 1970s, yet we are going around that loop again.
I would certainly like to see an end of in contract price rises, and more expensive out of contract pricing. In contact price rises would be more palatable if it wasn’t for the fact that new customers are often offered the old price or less, and if the rises weren’t at a fixed date rather than say after 12 months (is showing a price, with a rise perhaps 1 month later fair ?)
Even if incontract price rises were abolished, potential new customers would still be offered discounts in order to win their custom.
What you would be left with would be steeper price increases at the end of your contract, and possibly the major players taking legal action against the regulator.
Far2329Light: Would they? Is that a guarantee? What is there to stop a provider saying “Yes, we look after loyalty”. Might not be the cheapest to start off, of course, but I bet there’s a fair bit of simmering resentment for price increases.
Of course for most ISPs there are costs associated with taking on a new customer (connection fees, posting out hardware, etc), and with losing a customer (potentially getting postage of hardware back, admin, no more profit!). So they’d rather a non-churning customer base, too. Rather surprised this hasn’t been seen as a bigger moneyspinner.
Note: this doesn’t have to translate to “never raising prices”, but if even they said “yep, it’s £1 a month cheaper than our headline price for every year you’ve been with us, up to a maximum of £5”, I wonder how much allure that would have in the market?
@ Blueacid:
If in doubt, try running a business to find out.
“The remarks came after the Government reacted angrily to O2’s recent decision to increase their annual mid-contract price rises beyond what customers agreed to when they signed-up (here). Ofcom said they were “disappointed” by the change, which went “against the spirit of our rules which are designed to ensure greater certainty and transparency for customers when they sign up”
“Against the spirit of our rules which are designed to ensure greater certainty and transparency for customers when they sign up”
Yes so, when lawyers look at the language they are not interested in the “spirit”. all they are interested in is what they can do lawfully.
I would venture OFCOM’s lawyers are pretty incompetent, O2 lawyers are much more intelligent.
OFCOM need to look at the language and make sure it’s water tight.
Back in ye olde days of dial-up it was a 1 month contract you had. Although you did have have your own equipment i.e. modem and telephone line, so it was a lot more simpler than FTTP.
Certainly mobile phone bills going up in price mid-contract is something that shouldn’t be allowed. Bring back 12 month contracts with no mid-contract price rises, like it was back in the day in the early 2000s.
The thing is **even with** mid contract price rises, the cheaper mass providers can still work out cheaper than the likes of Zen as you can often haggle the monthly prices. Good luck trying to haggle with Zen…
My Zen Full Fibre 500 fixed 18 month contract is just ending (£45pm) and aware the renewal price is now £42pm rang Zen for a chat. Retentions immediately offered me same again for £39pm (and waived circa £10 renewal fee)
I’d call that a win – extremely easy and straightforward (and unlike the likes of Virgin) minimal grief
It absolutely needs to be permenantly banned. iSPs should only be allowed to raise prices when the consumer is out of contract knot in contract).
Well done that man. About time Ofcom stamped out these mid price hikes.
Ofcom simply imposed the present Broadband price structure to “protect” consumers. What followed was the loss of the 12 month fixed price contract, to be replaced with the monthly (usually expensive compared to contract options), 18 and 24 months contracts mostly with annual £+CPI% increases. That was deemed too difficult for Jo Public to comprehend so Ofcom simplified it to a fixed £x yearly which almost immediately was set at £3 or £4 by those providers who adopted in contract price increases. Now we face the prospect of some ISP’s driving the bus through it and imposing other increases where technically one can exit the contract if you act fast enough and be bothered (inertia means many will not bother and just moan). Buyer beware! If Ofcom want to protect consumers all they have to do is ensure that a price increase that is not written into the contract has to be notified appropriately and automatically makes the contract a rolling 1 month contract requiring at least 1 months notice of any further changes.
What would be far more useful would be limits to administration costs of new contract (provider change) and some limits on fees payable if you move home. Unless you are out of contract or on a 1 month contract the fees for early termination can be very expensive and it isn’t as if the connection is really likely to be unused for long.
With the present system you need to begin a contract at some stage in April, start in December or later, then you will really will be fleeced. Ofcom, do your job, look after the consumer, and ban these unfair contracts.
Zen don’t hike prices up mid contract because their prices are hiked on day 1.
If the customer has to agree to a 2 year term paying x amount no matter what with no ‘get out clause’ then its only fair that the same should apply to the provider.
Both parties are clear and know the expectations of each other.
If a provider can’t offer 2 years at x amount then they shouldn’t be offering it and going back to 1 year contracts.
There is plenty of competition out there so its not like there will be less market pressure to offer good prices
The contracts are agreed based on circumstances at the time they were negotiated. What we have is a government that is hiking costs for businesses through increased taxation and government policy that adds to their operational costs. Why should businesses’ response to the government’s actions be silenced?
It is a bit “have your cake and eat it” tbh. If you want annual price rises, then only offer 1 year contracts. In the meantime, I’d also expect 60 month contracts like with leased lines for a guaranteed price. As usual Ofcom not knowing anything about commercials.
Of course it also means Openreach and CityFibre can’t enforce minimum terms on their lines either when sold by other ISPs.
I’d finally like to see routers made entirely optional too, and if not, they get delivered (and binned) for free.
Leased lines are an odd example to use.
Can’t speak for the others but prices on BT’s leased lines are guaranteed to go up by 6% a year. If businesses want prices guaranteed not to go up they negotiate them or go elsewhere. They’re the largest supplier and I would run with their view of the ‘commercials’.
’10. ANNUAL PRICE INCREASE
10.1 The Regular Charges are subject to an annual increase of 6% each year. The revised Regular Charges will
be calculated by multiplying the then-current Regular Charges by 1.06 (rounded to the nearest whole
pence) and will take effect on bills dated on or after 1 April of each year. The change to the Regular
Charges as a result of this annual increase will not constitute a material detriment to the Customer and
will not give the Customer the right to terminate the Contract without paying Termination Charges.’
To be fair, that’s an new thing. They were fixed until maybe Q2 this year? Soruce: Ex BT SME
I dumped my Three contract 4 years ago and moved to their MVNO Smarty. This saved me about 40% on the Three price. I have not had a price increase since joining Smarty and no contract. It seems strange that the same company can offer almost the same product with very different terms.
I certainly won’t be entering any lengthy mobile contracts again. Go sim only on a rolling monthly contract and buy a new phone when I need one. My Xiaomi POCO X4 Pro is approaching 3 years and hopefully I will get at least another year out of it.
First off, with a discount operator, you are not getting the same level of service as you would get from a premium provider. If, however, the service is giving you what you want, that’s fine.
Be aware, though, that the arrangement will not continue indefinitely. Telefonica is now focusing on premium customers. If you do not fit into that category, they may well welcome you leaving their premium service.
Further, now that there are only three mobile operators, you should expect prices to level up to generate reasonable returns for the operators to fix their very slim margins. That will include increases in charges to the discount operators as their various contracts come up for renewal.
If mid-contract price increases are banded, then prices across the sector will rise in bigger steps. Take your pick.
P.S.
Altnets would not escape the steeper price increases either.
They should be banned. However, if that’s not possible then other factors should be considered;
It’s not even mid term. Now that it is not based on inflation rates published at the beginning of the year, there is no reason for the mid term to be in April. It should be 1/2 way through the contract, i.e. on the anniversary of taking out the contract.
It could still have been a percentage increase so long as it is quoted in £&p so lower end contracts are not disproportionately carrying the increase.
@Just a thought: Spot on, the very point i was making earlier. Should be the anniversary, not every April, to the detriment of the consumer, in most cases. Still better to outlaw these contracts completely though, imho.
Your proposal would result in different price increases in each month, given that the rate of inflation is adjusted each month. You would end up with neighbours on comparable services paying different prices simply because of the month in which they started their contract.
If you sign a contract for two years or however many, the price should remain at that. Increase the price at the end of the contract, but I’m guessing companies don’t want to lose current customers or offer new customer promotions to them so the mid point increase bridges that and not everyone can be bothered with switching to a new provider.
I’m with ZEN currently and my 18 month contract has finished and they increased my price from £40 a month for 300mb to £41.50 for being out of contract which I didn’t find was too bad to be totally honest compared to Virgin etc.