An estimate indicates that the largest UK broadband providers will reap a windfall of about £2 billion if they proceed with inflation-busting pricing rises next spring, which will exacerbate the cost-of-living issue.
Many of the country’s major internet service providers, including BT, TalkTalk, Shell, and Vodafone, use a method to increase the cost of monthly bills by the rate of inflation as calculated by the consumer price index (CPI) in January + by 3.9%.
The Bank of England predicts that inflation will reach 13.3% in the fourth quarter, while some analysts warn that it could surpass 22%. According to estimates from broadband provider Hyperoptic, companies will gain nearly £1.4bn in additional revenues from the next round of price increases next year.
BT, which ascribed the majority of its sales rise between April and June to this year’s over 10% rate increase, has already stated that it will “stay the course” next year as its expenses continue to increase.
This year, Virgin Media O2, the third largest broadband provider in the United Kingdom, increased its costs by 3.9% above the retail pricing index (RPI) rate of inflation, which is several percentage points higher than the consumer price index (CPI).
The supplier does not contractually guarantee an annual price increase, although this is the norm. However, if it were to increase prices, one expert estimates that the whole telecoms windfall would exceed £1.7 billion.
This amount does not include the additional billions that telecom companies will earn by increasing mobile phone contract costs next year.
James Fredrickson, director of policy at Hyperoptic, stated, “Broadband is an essential utility, and it must be cheap now more than ever.”
At a government-led meeting in June, the largest mobile and internet providers in the United Kingdom agreed on a strategy to assist customers struggling to pay their bills, including allowing users to switch to lower plans without incurring a fee and offering more low-cost “social rates.”
Sky, the second-largest internet provider in the United Kingdom, has introduced an 18-month “price freeze” for new subscribers as competition heats up among households seeking to reduce their telecoms costs. Sky, unlike the majority of its competitors, does not index its price increases to inflation, with an average annual increase of roughly 5% this year.
In April, Which? estimated that 5.7 million families experienced at least one “affordability issue” with their mobile, landline, or internet service, such as missing a payment or having to cancel or modify their account.
