{"id":36818,"date":"2024-01-11T08:52:00","date_gmt":"2024-01-11T08:52:00","guid":{"rendered":"https:\/\/www.ispreview.co.uk\/?p=36818"},"modified":"2024-01-11T08:56:45","modified_gmt":"2024-01-11T08:56:45","slug":"questions-after-uk-chancellor-says-cma-may-probe-mid-contract-uk-isp-price-hikes","status":"publish","type":"post","link":"https:\/\/www.ispreview.co.uk\/index.php\/2024\/01\/questions-after-uk-chancellor-says-cma-may-probe-mid-contract-uk-isp-price-hikes.html","title":{"rendered":"Questions After UK Chancellor Says CMA May Probe Mid Contract UK ISP Price Hikes"},"content":{"rendered":"

The UK Government’s Chancellor, Jeremy Hunt, has, in a new ITV interview with MSE’s Martin Lewis, raised a few questions after he proposed to ask the Competition and Markets Authority (CMA) to probe mid-contract prices hikes by broadband ISPs and proclaimed that the network costs for providers “don’t go up at all.<\/em>“<\/p>\n

At this point we’ll assume that, by now, almost everybody is broadly familiar with the issues of mid-contract price hikes by broadband ISPs and mobile network operators (mostly via the largest players as many smaller operators don’t adopt the same approach).<\/p>\n

The practice itself has been around for decades, although in recent years providers have increasingly incurred the wrath of consumers by linking them directly to inflation (i.e. increasing their prices each year by nearly 4% plus the rate of annual inflation – CPI or RPI). Inflation has spent the past couple of years being sky-high and that has driven some significant hikes, although it is now rapidly falling.<\/p>\n

The problem isn’t just that this has resulted in large price hikes, but also that such policies are often hidden away in the small print and many consumers find them confusing (i.e. they\u2019re not familiar with how \u2018inflation<\/em>\u2018 actually works or the meaning of terms like CPI or RPI). The fact that CPI\/RPI is also a highly variable percentage figure that is difficult to forecast (even the Bank of England sometimes gets it wrong) certainly doesn\u2019t help.<\/p>\n

The good news is that the Advertising Standards Authority<\/a> (ASA) have already introduced new guidelines to improve the transparency of such policies (here<\/a>). Ofcom<\/a> followed this last month by effectively proposing to BAN providers from doing mid-contract price hikes that are linked to inflation and percentage changes (here<\/a>), although that change – if approved – won’t be formally introduced until the second half of 2024.<\/p>\n

However, neither the Chancellor nor Martin Lewis seemed to be aware of the looming ban during their interview (it’s never mentioned), which was broadcast as part of ITV’s latest episode of The Martin Lewis Money Show Live<\/em><\/a> on Tuesday. Instead, Lewis asked the Chancellor why he “doesn’t just ban<\/em>” the providers from doing it. In response, the Chancellor proposed to ask the CMA to probe the practice, which given Ofcom<\/a>’s proposal would now seem to be unnecessary.<\/p>\n

On the other hand, Ofcom’s ban will come too late to prevent the next round of annual hikes (due to be confirmed later this month), even though those rises are expected to be significantly lower than last year (here<\/a>). But writing to the CMA isn’t going to stop that either, as any probe would be a slow process. The only way to stop the next batch of mid-contract hikes is for ISPs to do it voluntarily, and we’ve seen no indication of an 11th hour U-turn.<\/p>\n

Finally, the chancellor also attempted<\/em> to demonstrate his understanding of how network costs for broadband ISPs work.<\/p>\n

Jeremy Hunt, UK Chancellor, said:<\/strong><\/p>\n

“When you’re a broadband provider you obviously do have staff whose costs go up, and some of those costs you have to feed through your bills. But a lot of your costs are actually the costs of a network, which once it’s in place doesn’t go up at all.”<\/p><\/blockquote>\n

Sorry to burst your bubble on this one, Chancellor, but that is incorrect. We suspect the chancellor may be confusing the physical cost of first-time infrastructure build with the ongoing running costs of a wider network. The latter can of course be affected by a large variety of different factors (backhaul capacity costs, routing\/peering arrangements, periodic hardware upgrades, electricity costs, system\/software changes etc.), which will also vary between providers, depending upon how their network, suppliers and contracts are set up.<\/p>\n

As an example, consider Openreach<\/a>’s national network. The network access provider has only just announced a large swathe of inflation linked price rises for ISPs at the wholesale level – impacting everything from Ethernet and backhaul charges to construction charges and broadband line rentals. In simple terms, the cost of running your network do, sadly, often go up too.<\/p>\n

Admittedly there are sometimes balancing factors too, such as in terms of how – over time – the value of network capacity improves (i.e. getting more Megabits for the same sort of money) and the upkeep costs of more modern networks (i.e. full fibre vs copper) tend to be significantly lower.<\/p>\n

On the other hand, ISPs that are more subject to some of Ofcom’s biggest regulatory measures (e.g. automatic compensation and speed codes), may also face higher costs in adapting and keeping to those changes. Suffice to say that, no matter how much these things may vary, it is not only staff costs that go up or change.<\/p>\n

As such, it’s important to remember that Ofcom’s ban on mid-contract hikes linked to inflation, once it’s introduced, won’t actually stop prices from rising. Providers will instead have to balance the higher risk they’ll be taking on 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 in the grander scheme of things, none of this will make services cheaper, only clearer.<\/p>\n","protected":false},"excerpt":{"rendered":"

The UK Government’s Chancellor, Jeremy Hunt, has, in a new ITV interview with MSE’s Martin Lewis, raised a few questions after he proposed to ask the Competition and Markets Authority (CMA) to probe mid-contract prices hikes by broadband ISPs and proclaimed that the network costs for providers “don’t go up at all.“<\/p>\n","protected":false},"author":1,"featured_media":36820,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"ngg_post_thumbnail":0,"footnotes":""},"categories":[1],"tags":[36,38],"class_list":["post-36818","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-uk_isp_news","tag-ofcom-regulation","tag-politics"],"share_on_mastodon":{"url":"https:\/\/mastodon.social\/@ispreview\/111736469773132510","error":""},"yoast_head":"\nQuestions After UK Chancellor Says CMA May Probe Mid Contract UK ISP Price Hikes - ISPreview UK<\/title>\n<meta name=\"description\" content=\"The UK Government's Chancellor, Jeremy Hunt, has, in a new ITV interview with MSE's Martin Lewis, raised a few questions after he proposed to ask the\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.ispreview.co.uk\/index.php\/2024\/01\/questions-after-uk-chancellor-says-cma-may-probe-mid-contract-uk-isp-price-hikes.html\" \/>\n<meta property=\"og:locale\" content=\"en_GB\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Questions After UK Chancellor Says CMA May Probe Mid Contract UK ISP Price Hikes - 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