Ofcom is proposing a ban on broadband and mobile mid-contract price rises that are linked to inflation. It said that companies must tell customers when they sign up how their monthly bills will increase in future, and on what date.
The ban follows a review by the regulator that found inflation-linked rises are causing “substantial amounts of consumer harm”.
It brings to an end the current practice of providers stating in contracts that prices will rise by the rate of inflation plus a set percentage – which in recent years has been around 3.9 per cent.
With inflation reaching double digits early last year, it meant many companies hit customers with rises of over 14 per cent. Increases in 2024 are expected to be around nine per cent. Because these increases are stated in the contract, customers can’t cancel without paying an early-termination fee.
Ofcom’s research found that 40 per cent of broadband customers (11 million) and over half of phone users (36 million) were on contracts with inflation-linked price rises (see www.snipca. com/48685).
It said the number of customers on these contracts would increase soon because Three and Virgin Media are planning to introduce them.
Yet most customers don’t understand how these contracts work, Ofcom claimed. Only 16 per cent of broadband customers and 12 per cent of phone users were “both aware of the price rise and able to identify that it was inflation-linked with an additional percentage”.
It also found that even when people do consider inflation-linked price rises when choosing a contract, they often “do not understand them fully and find it difficult to estimate what the impact could be on their payments”.
Complaints more than double
Anger over mid-contract increases has increased in the past few years. Ofcom said it received more than 800 complaints about price rises in the year to October – almost double the number in 2021.
Ofcom acknowledged that competition has meant that average prices have actually fallen in real terms in the past five years, and that services have improved. It also said it realised providers had to cover the cost of heavy investment in their networks.
But it warned that confusing price rises were undermining customers’ confidence to shop around, and therefore harming competition.
Ofcom will consult on the changes and publish its decision in the spring. It plans to introduce the new rules four months
