Broadband and mobile price rises under review by Ofcom
The telecoms regulator, Ofcom, has announced that it will review whether inflation-based mid-contract price rises give broadband and mobile phone customers enough certainty about how much their deal will cost.
An increasing number of broadband and mobile phone providers have introduced these mid-contract price rises, which are usually based around the Consumer Price Index (CPI) or the Retail Price Index (RPI), leaving customers facing bill bikes of 14-18% this year. The rises are also baked into consumer contracts, meaning millions of customers face a lose-lose choice between accepting an exorbitant price hike or paying a punitive exit fee.
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Why is Ofcom investigating mid-contract price rises?
Many telecoms companies now raise their prices every spring, using inflation as a basis but typically adding on an extra 3-3.9%. Companies like BT, EE, TalkTalk and Vodafone use the Consumer Price Index (CPI) as a basis, while a handful of others (O2 and Virgin Mobile) use the Retail Price Index (RPI) which is typically higher than CPI.
Ofcom rules state that telecoms providers must offer their customers the right to exit their contract penalty free if they surprise them with unexpected price rises. But because these prices rises are part of consumer contracts, they don't qualify under these rules. That means that customers on a fixed-term contract have no choice but to pay the higher price - or an eye-watering exit fee to terminate their contract. Our research has shown these exit fees can exceed £200 for broadband customers.
Ofcom has expressed concern that inflation-based mid-contract price rises are unpredictable. It has conducted preliminary research which shows that a third of customers aren't clear on whether their price is likely to rise. It also found that more than half of customers do not know what CPI and RPI measure. It will explore whether it needs to intervene to ensure customers have greater certainty and clarity about how much they will pay, when they take out a contract.
Last year, Ofcom launched a separate investigation into whether mid-contract price rises were clearly advertised to customers who entered contracts between March 2021 and June 2022. In June 2022, it introduced a rule requiring providers to give customers a written summary that includes clear information on price rises. The results of both investigations will be published later in the year.
The impact of planned mid-contract price increases
Given inflation has reached its highest rate in decades, customers this year face increases of at least 13.5%. BT has already confirmed it will go ahead with its price rises, as will EE Broadband and Plusnet, meaning millions of broadband customers will see their price rise by 14.4%.
Vodafone also allows for a price rise of 14.4% for both mobile and broadband customers, while TalkTalk broadband customers will see their prices rise by 14.2%.
O2 and Virgin Mobile base their price rises around the January RPI which hasn't yet been announced. However, in recent months it has been around 13% – if this trend continues, O2 and Virgin Mobile customers will see their price rise by 17-18%.
An increasing number of telecoms contracts last 18, 24 or even 36 months, meaning customers have little way of knowing exactly how much their price will increase when they sign up.
Meanwhile, research has shown that an increasing number of customers are concerned about being able to afford their phone, broadband and TV bills. The number of struggling households doubled to 9.1 million last year, with some 17% of households cutting back on other spending, such as on food and clothing, to afford their telecoms services.
Read more about Virgin Media's price hikes for broadband, mobile and TV customers, and how to avoid them.
Which? calls for action from telecoms providers
A Which? campaign is calling on essential businesses, including telecoms providers, to help consumers grappling with the impact of the cost of living crisis. Like supermarkets and energy companies, telecoms providers must pull together to create a fairer market, and help those struggling with the financial and emotional impact of rising prices.
We're calling on all broadband providers to allow customers to leave their contract and switch to another provider without penalty if prices are hiked mid-contract, and to cancel any 2023 price increase for financially vulnerable customers.
Rocio Concha, Which? Director of Policy and Advocacy, said: 'Our research has found that many telecoms customers are trapped between costly mid-contract price hikes and exit fees of over £200 - so it is absolutely right that Ofcom is reviewing these inflation-linked price hikes and considering their fairness for consumers.
'Inflation has risen dramatically in recent months and as broadband contracts typically last for 18 or 24 months, customers do not know how much prices could rise by when they sign up. In the meantime, Which? is calling on providers to let their customers leave without penalty if they face mid-contract price hikes and to cancel 2023 mid-contract price rises for financially vulnerable consumers.
'With many households struggling to make ends meet, it is completely unfair that people are trapped in this situation. Telecoms providers need to step up and play their part to support their customers through the cost of living crisis.'
How to avoid broadband and mobile price rises
If you're out of contract, keep in mind that you don't have to accept any price rise – you're free to shop around to find a better deal. In many cases you'll find that it will save you money, and you may get a better service. But check the T&Cs of any new contract carefully so you're aware of your new provider's policy on price rises.
Luckily not every provider employs this somewhat sneaky pricing strategy - some commit to keep your prices the same for the duration of your contract. Hyperoptic, Utility Warehouse and Zen Internet are all broadband providers that promise not to raise prices during your minimum contract period.
Tesco Mobile also guarantees that your price won't change as part of its 'Tariff Promise'. Mobile customers can also opt for a rolling one-month Sim-only deal rather than a fixed term contract.
If you're within the minimum term of your contract and are concerned about being able to pay a higher price, get in touch with your provider. If you're a broadband customer who is eligible for a social tariff, your provider should allow you to switch to one.
If you're not eligible for a social tariff, your provider will take other steps to help you with your bills - read more about the things providers can do to offer support for customers struggling with their broadband bills.
For more advice on cutting your telecoms bills, read our tips on how to make savings on broadband and TV bills, and how to save on your mobile bills.