- New rules effective January 17
- Price hikes must be disclosed upfront
- Three of five subscribers face increases
A regulatory crackdown will safeguard consumers from unexpected price increases in mobile phones, television, and broadband services.
Currently, most communications and internet companies boost their costs mid-contract due to inflation, frequently with an additional 3.9%.
This might result in a 7.9 per cent increase in prices for millions of customers in April and May.
However, customers will be shielded from unexpected price increases beginning January 17th, thanks to new guidelines issued by regulator Ofcom.
Broadband, TV, and mobile companies can still raise their prices, but any increases must be disclosed in pounds and pence rather than percentage terms when a deal is signed.
Ofcom evaluated the prohibition in December 2023.
Ofcom telecoms policy director Cristina Luna-Esteban stated, “People need to have certainty about their monthly outgoings.” However, this is impossible if you are bound by a contract in which the price could fluctuate due to something as unpredictable as future inflation.
‘We’re stepping in on behalf of phone, broadband, and pay TV customers to put an end to this practice, so people can know what they’ll pay, compare plans more readily, and take advantage of the UK’s competitive market.’
Any new phone, broadband, or television contract signed before January 17th may still be subject to annual inflationary increases.
For mobile phone plans, the portion of the bill that grows is the airtime – the cost of calls and data – rather than the handset itself.
According to Ofcom, around three of every five broadband and mobile subscribers will face inflation-linked price increases in April 2024.
Many were taken off guard and suffered unanticipated bill spikes.
However, consumer organization Which? Stated that more might be done to ensure price increases were affordable.
Rocio Concha, Which?’s head of policy and advocacy, stated: “With Ofcom calling time on these unfair price hikes, providers must stop this practice immediately.” Ofcom now needs to ensure that future mid-contract price increases remain competitive.
‘It is regrettable that the phrase ‘prices may fluctuate’ has not been outlawed. The regulator must be ready to intervene if these ad hoc hikes are exploited as a backdoor for providers to impose unforeseen price increases on customers.
Social tariffs don’t increase with inflation.
The social tariff is the most common mobile and internet plan type, and it has yet to increase in accordance with inflation.
These offers are not available to everyone and are typically limited to individuals on benefits, those with lower incomes, or older people.
A social tariff is a low-cost option solely available to poor households.
These affordable agreements exist because industry regulator Ofcom has required providers to provide low-cost solutions to the most vulnerable clients since 2020.
Another advantage of social tariffs is that there are no exit costs if you leave before the term ends.
Broadband providers argue that when it comes to price increases, they have limited options.
Most broadband providers use Openreach’s infrastructure to deliver broadband to customers’ homes and pay the BT-owned company an annual fee.
By Ofcom rules, that fee rises with inflation each year, and broadband providers would claim that their costs must increase by at least inflation.
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The corporations also claim that a third to a quarter of their clients do not perceive price rises because they are on a social tariff, vulnerable, or specific fixed-rate contracts.
However, the cost of providing these people with broadband continues to rise annually with inflation, forcing businesses to pass on expenses to other customers.
However, these reasons, which mobile and broadband companies frequently discuss in secret, do not explain why many of their costs are rising substantially faster than inflation.
They also need to explain why the now-common practice of adding a charge on top of inflation-linked increases is relatively new, with many providers only implementing this strategy in recent years.
