Phone, broadband and pay-TV companies will be banned from imposing inflation-linked price rises in the middle of a contract and must instead tell customers upfront and in “pounds and pence” about any price rises, under rules proposed by Ofcom.
The telecoms regulator said inflation-linked mid-contract price rises did not provide enough clarity about the prices people will pay, and caused “substantial amounts of consumer harm” by hampering their ability to shop around for a better deal.
The watchdog wants to ban this practice, which it says risks undermining competition. The decision follows its own lengthy review, 800 complaints from consumers and an investigation by the Guardian that revealed the UK’s largest mobile and broadband companies were fuelling “greedflation” earlier this year after pushing through the biggest round of price hikes for more than 30 years.
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Melanie Dawes, Ofcom’s chief executive, said: “At a time when household finances are under serious strain, customers need prices to be crystal clear. But most people are left confused by the sheer complexity and unpredictability of inflation-linked price rise terms written into their contract, which undermines customers’ ability to shop around.
“Our tougher protections would ban this practice once and for all, giving customers the clarity and certainty they need to secure the best deal for their needs and budget.”
Analysis published by the Guardian in June revealed that six companies controlling most of the telecoms market charged a 3.9 percentage point supplement on top of their annual inflation-linked increases this year. The practice means millions of customers have faced mid-contract price increases of up to 17.3%.
The consumer group Which? hailed Ofcom’s move as a “huge win for consumers”.
Rocio Concha, its director of policy and advocacy, said: “It’s positive that the regulator plans to move quickly to consult and implement these proposals. With Ofcom calling time on these unfair price hikes, providers must stop this practice immediately.”
Which? research found that the UK’s biggest telecoms providers are lining up above-inflation price increases for broadband and mobile customers that will add almost £500m to consumers’ bills from next spring.
BT, EE, Vodafone, Virgin Media O2 and TalkTalk are to increase bills for more than 22 million broadband and mobile phone customers under mid-contract price rise clauses from April and May next year.
TalkTalk, which along with several other broadband providers sources its connectivity from BT Openreach, said consumer price rises were linked to inflation because its wholesale costs also rose in line with inflation. It called on Ofcom to review this situation.
Tristia Harrison, the TalkTalk chief executive, said: “The link between the two is obvious, is essential for protecting both consumers and competition, and needs addressing.”
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The company said fewer than two thirds of TalkTalk’s customers actually received the price increase in 2023, due to exemptions for vulnerable customers and some fixed contracts, while the firm’s wholesale costs rose by 11.1% for each connection.
Ofcom revealed that take-up of social tariffs more than doubled in the last year, but millions of eligible customers do not know about them.
As of April, two-fifths, or 11 million, broadband customers and more than half of mobile customers – 36 million people – were on contracts subject to inflation-linked price rises. Ofcom expects these numbers to grow further, to about three-fifths of broadband and mobile customers, as Three and Virgin Media apply inflation-linked in-contract price rise terms to more contracts in the coming months.
Between January and October, the watchdog received more than 800 complaints related to price rises, almost double the number during the same period in 2021, many of which highlighted uncertainty created by inflation-linked price rises.
Ofcom has invited comments on its plans under a consultation that will run until 13 February, and intends to publish its final decision next spring. The new rules would come into effect four months later.
