Ofcom’s Mid-Contract Pricing Policy Resulted in Higher UK Broadband Prices
In news that will not come as a great surprise to ISPreview’s readers. A new MSE survey of 47,000 tariffs – all from UK mobile and broadband providers with the biggest market share – has found that Ofcom’s latest policy to improve the transparency of mid-contract price hikes actually seems to have resulted in consumers paying more for their service.
At the start of last year the UK telecoms and media regulator, Ofcom, began requiring telecoms providers to adopt a new approach to mid-contract price hikes, which finally did away with the old and sometimes confusing percentage and inflation-based model – replacing it with one that require providers to set out such price rises “clearly and up-front, in pounds and pence, when a customer signs up” (here).
On the surface this seemed like a good idea, not least because it made annual price hikes clearer and more transparent. On the flip side, it also made it more difficult for providers to balance price rises across lots of different packages, which resulted in many providers adopting a flat price rise – set at the same level for every package.
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For example, BT were the first to jump by increasing the monthly broadband price that customers pay by a flat £3 extra – effective from March or April each year (the level of increase varies a bit between providers), which was later increased to £4 after inflation remained higher than forecast (here). Many other providers have since adopted a near identical approach.
The problem with this approach, which we’ve raised many times before on these pages, is that it has a tendency to hit those on the cheapest broadband and mobile packages the hardest (i.e. if you pay £20/month then a £4 rise equates to a 20% price hike each year), while only giving a reprieve to the smaller portion of consumers who take more expensive packages (e.g. if you pay £60 then a £4 rise equates to a 6.67% increase) – not very fair to those on cheaper packages.
Results of the new study
According to the new study of 47,000 tariffs from UK mobile and broadband providers, which was conducted by Martin Lewis and MoneySavingExpert (MSE), some three in four were found to be worse off under Ofcom’s new system than they would have been under the previous inflation-linked approach.
In addition, in almost all cases, “all customers faced above-inflation price rises under the new system” and “those who suffer most are those who have tried to keep their costs down by choosing cheaper tariffs“.
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Impact on a selection of broadband contracts
| Broadband contract type | Original price | Price rise under the ‘pounds and pence’ system | Price rise under the old ‘inflation-linked’ system | Current CPI |
|---|---|---|---|---|
| Basic (150 Mbps) | £18 | 22% | 7.1% | 2.8% |
| Medium (500 Mbps) | £26 | 13% | 7.3% | 2.8% |
| Super-fast (900 Mbps) | £34.99 | 11% | 7.3% | 2.8% |
Martin Lewis said:
“This was frustratingly predictable. Let’s be plain, it provisionally looks like the regulator’s intervention resulted in most contracts costing more. Transparency only goes so far, we don’t want customers overpaying just because they were told about it first.
The solution has always been bleedin’ obvious. Just ban above-inflation mid-contract price hikes. Of course, many, including me, would prefer a ban on any mid-contract rise, as the price you sign up for should be the price you pay over the length of the contract. Yet that risks possible market distortion, as firms may lift initial prices as a provision against unexpected costs mid-contract.”
Sadly the government has, thus far, only seemed inclined to pay lip service to this problem, such as through their soft voluntary Telecoms Consumer Charter (TCC), while at the same time saying they have “no plans to ban in-contract price rises” for UK consumers taking broadband, mobile and phone services (here).
One difficulty for the industry is over the question of how you ban mid-contract hikes without also disrupting the ability of providers to offer a diverse range of attractive first-contract-term style service discounts. In a competitive market this can help to attract or retain customers, while also supporting the growth of new alternative networks against established incumbents.
Finding a balanced approach that preserves some discounting, while still being easy to understand and apply in a way that’s fair across lots of different package tiers, is not an easy task. But much like MSE, we remain broadly in favour of a ban on mid-contract hikes. Finally, inflation has since fallen back a bit over the past year, so we’re waiting to see if any big providers reduce their mid-contract hikes later in 2026.
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Take note that there is some choice in the market, so not all providers adopt a policy of mid-contract hikes, although the current system is common amongst the largest players and most consumers use those.
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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Is this really valid? Starting prices may have been discounted with the knowledge that front-loaded discounts are recovered later in the contract. You would need to compare total cost of contract before and after the change. And even then you would need to control for confounding factors such as inflation, taxes etc to work out whether any price increase was due to the pricing model or not.
Mid term in contract price rises should be banned full stop. If operators can fix in contract price rises then they can fix prices for the entire duration of the contract. Not only do in contract obscure the true price of the contract they are also unfair as customers pay different amounts of increase depending on the contract start date.
Anyone being fired over this?
Of course not, no accountability in an unelected quango.
Had they done their job properly, mid term price increases whilst in an agreed contract should be illegal, with OfCom having powers to override if inflation in double digits or some other significant event to protect operators from genuine events. What’s the point of a contract these days, it’s in favour of the operator. Alleged discount, because the price is artificially inflated to make it look like a discount. What we have is a varying priced contract with no exit clause for customer anymore in majority of 12/18/24 month contracts.
The key words there being ‘agreed contract’. If a customer agrees to a price, while knowing full well how much it will change by and when, then where’s the foul? As the article states, there are other options in a free market.
Ed, you think rackets are justifiable?
Heck no. This was the regulator’s intention all along, to protect the providers. It’s the same with OFGEM.
On the other hand, their automatic compensation scheme discourages providers from NOT employing mid contract price rises because even those providers are forced to increase the amount of automatic compensation each year in line with inflation.
Back to a maximum of 12 month contracts then. The companies only went to 24 months to slow down switching.
Thank you. I was just going to say this. It makes sense.
Agree, I was not a fan of 18 months, but 24 months is ridiculous, unless you are getting something for it.
If my provider gave me a good price fixed for 24 months then that is a different thing, but the way it is done with prices going up twice in the contract is over the top.;
The practice needs to be banned because it is distorting the market. The market becomes less competitive if consumers cannot rely on the headline price, and have to calculate for each supplier the total cost. Consumers will pick the cheapest one – eg. the £28 with price increases, over the better value one such as a £30 contract with no increases.
If OFCOM are really set on allowing price rises, then suppliers should be forced to show a ‘total contract cost’ value in all advertising. A bit like how in finance, it is mandatory to show the AER.
Average monthly price is what they should be required to show so comparisons with different contract lengths work as well.
I really don’t care if they ban it or not, the price is fixed and known at the start of the contract either way – that is enough for me. However, I do think those getting hot under the collar about this pricing structure and expecting cheaper prices when it is banned will be very disappointed.
If everyone is playing by the same rules then competition should keep the prices down to a certain extent. People should be able to see what is the cheapest (but not necessarily the best) without having to do sums.
Their outright refusal to investigate when it was claimed to cost consumers more, says all it needs to. It’s clear who they are in bed with. Another dinosaur in that government. The consumer will just take it lying down, as they always do.
I was on Three with a legacy contract that increased a flat 4.5% annually and I was fine with that. It was mobile broadband. When this change came through, the pounds and pence figure increase equated to a 22% increase so I cancelled the service and left. In an ironic twist, I ended up with a Scancom data SIM and instead of unlimited it was 600gb/month (I use nowhere near this), and with a deal Scancom ran I ended up paying less than the price increase alone when the one off fee was divided per month so Three lost out on me.
Sadly I have no illusions there will be thousands who don’t do what I’ve done and just suck up the increase. Ofcom’s detail to consumers is frequently questionable, I still remember them promising cheaper directory enquiries as 40p (or around that) was too expensive, they liberalise the market and then prices go up fivefold overnight.
Quite some hypocrisy being shown by Martin Lewis and MSE.
MSE is owned by MONY Group who also own MoneySupermarket, a price comparison site that gives undue prominence to the initial price. They are a large part of the problem, by encouraging customers to make poor choices for their own commercial gain.
MONY Group must be well aware of this, because price comparisons on the MSE site display the go-to prices prominently but on MoneySupermarket they are shown in a tiny font.
Right now, sorting 24 month sim only deals by total cost, MoneySupermarket ranks a Three deal at £6 increasing to £7.80 then £9.60 with £15 cashback higher than several other deals at £5.95 or £6 with no increases (and more data).
Martin Lewis may not own MSE anymore, but surely he has enough influence to force the owners to get their own house in order.
Very much a case of “be careful what you wish for”. ML was one of the key protagonists when inflation peaked, claiming the rises were unfair to consumers.
His championing of being clear with the customer resulted in this legislation and operators adhered to it.
Whilst I hate the idea that prices can increase despite signing a contract, you can’t blame operators for adhering to the regulations imposed upon them.
I couldn’t agree more.
I will say that operators didn’t help themselves when the inflation linked system came in, with so many of them jumping to baked in increases of 3.99% plus inflation. It looked about as good as it felt.
However, ML essentially giving it the ‘I had nothing to do with this’ when he was one of the ones flying the flag for the pounds and pence approach, the hypocrisy is too much.
Like everyone else I’m no fan of prices going up during minimum terms.
Funny thing is though, whenever ML (or whoever) starts on this I just think back to the original regulations – if your contract price goes up above inflation during your contract you can leave without penalty (I did this multiple times back in the day). Whilst not an outright ban it means that, going by the current inflation rate, if your contract price went up by 2.81% or more you could leave without penalty. Under the original regulations anyway.
@tinker I forgot all about those terms and yes you’re absolutely right. That should definitely be the way to go now.
This was all because of the huge inflation spike in 2022-2023. Rushed in after those shock bills in April 2023. Vast majority of people worse off. Should be able to pick inflation linked or fixed at sign up.
Yet again, Ofcim failing to understand the issue.
The issue is that the customers enter a contract, a contract is a contract, just stop the hikes mid contract, that’s all we wanted.
What have they done here?
Waste of effort.
Good old regulators like OfCon etc, and lets not forget their government overseers, it not difficult to observer they are either not working for consumers or are incompetent/delinquent, evidently not fit for purpose in some areas or their responsibilities.
The price and profit distribution of all the suppliers vs a single national utility at cost..? Keep it simple Stupid for all.
One doy someone may wonder about the costs of all the changes, switching, pricing manipulation strategies, rather than just having that wasteful cost going into actual service delivery..