Ofcom to investigate phone and broadband providers over price rises
An industry-wide enforcement programme has been launched by telecoms regulator, Ofcom, into whether price rises baked into contracts were clearly advertised to customers.
It calls for greater transparency on mid-contract price rises to help consumers handle rising costs, having analysed complaints that suggest those who entered contracts between March 2021 and 2022 may not have been provided with clear enough information about the hikes.
Read our round-up of the best and worst UK mobile networks and best and worst broadband providers to find out which brands came out top.
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Ofcom's rules to protect telecoms customers
Ofcom’s rules state that if a provider wants to include a potential future price rise in a contract, the terms have to be detailed prominently and transparently at the point of sale.
If a customer did not agree to the terms when signing up, and this is deemed to be because the terms were not made with enough clarity and visibility, then providers should have both notified them about price increases and offered the option of exiting penalty-free.
The regulator will collect further information from providers to assess next steps, and may launch separate investigations into individual firms.
Customers struggling with cost of living
This year, inflation has reached its highest rate in 40 years, resulting in costly price increases for telecoms customers. Ofcom’s latest research found that 9.1 million UK households are struggling to afford their phone, broadband and TV bills, double the number than in April 2021.
Ofcom also found that 17% of households are now cutting back other spending, such as on food and clothing, to afford their communications services. That is a 4% increase from June 2021.
How broadband and mobile inflation might affect you
Providers use a variety of calculations to work out price increases. Tesco Mobile is the only mobile network to commit to price freezes, where contracts do not rise before the end. When it comes to broadband. Hyperoptic, Utility Warehouse and Zen Internet all commit to keep prices the same for the full duration of your contract.
But an increasing number of providers put prices up every year, even if you're within your minimum contract period. They use the Retail Price Index (RPI) or the Consumer Price Index (CPI), usually adding an extra 3.9% on top of the inflation rate.
As an example, this means that O2 and Virgin Mobile customers are most at risk of the highest price rises. If RPI is 13%, this would come to a 16.9% price increase when you factor in the additional 3.9% hike. BT Mobile, EE, Plusnet and Vodafone customers would also face steep increases of the CPI rate (11%) plus 3.9%, resulting in a 14.9% increase.
Broadband customers with BT, EE, Plusnet, TalkTalk and Vodafone would also face a 14.9% increase, assuming CPI is 11%.
To stop your telecoms bills spiralling out of control, read our advice on how to avoid inflation on a mobile contract and beware stealth price rises on broadband sales.
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.
This includes carefully considering what level of mid-contract price rise is justified in the coming year, and enabling consumers to leave without penalty when prices are increased mid-contract. We also want providers to do far more to increase awareness of social tariffs, and ensure that customers moving to these tariffs don't incur additional charges.
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.
Rocio Concha, Which? Director of Policy and Advocacy, said:
'Our research has found that some customers who signed up for a broadband contract in early 2022 could see prices soar by up to £113 in 2023 due to mid-contract price rises. It's extremely concerning that these mid-contract price rises may not have been properly advertised to customers when they signed up and we're pleased to see Ofcom investigate the issue.
'Given the cost of living pressures on consumers, Which? is calling on telecoms firms to allow customers to leave their contract without penalty if prices are hiked mid-contract – regardless of whether or not these increases can be said to be ‘transparent’ - and to carefully consider what level of mid-contract price hikes can be justified.
'It is especially important that those eligible for social tariffs do not incur any extra charges when moving to discounted tariffs – even if they are currently mid-contract. Providers also should not charge any set up costs for social tariff customers.'
Read our guides on 10 ways to save money on your mobile phone bill and 10 ways to save money on your broadband and TV bills for tips to help to reduce your outgoings on telecoms.