This year's inflation is the highest it's been in decades, and our research has shown low-income customers (with a household income of less than £21,000) will see price increases of up to £77 per year.
It is unacceptable that during an unprecedented cost of living crisis, telecoms firms are profiting from those who can least afford it.Broadband providers and mid-contract price hikes
Every April, many broadband firms – such as BT, EE, Plusnet, TalkTalk and Vodafone – raise their prices in line with the Consumer Price Index (CPI) plus an additional 3% to 3.9%. As these price rises are often applied mid-contract, affected customers either have to accept the increases or pay costly exit fees to leave their contract early.
This year, broadband firms will go ahead with price hikes of over 14% in spite of calls from Which? to cancel 2023 hikes for financially vulnerable consumers and allow all customers to leave without penalty if they face mid-contract price rises.
Vodafone has confirmed that it will automatically exempt customers it has previously identified as financially vulnerable from this year's price rises. This is an important step in the right direction and Which? is calling on all other providers to make the same commitment.
TalkTalk has also said it will automatically exempt its most financially vulnerable customers but did not explain its criteria for assessing this or how it would be publicised.
Out of contract customers can act now to avoid the price hikes. Read our guide on to find out what's involved, and see how much you could save in our pick of the .How much more will low-income customers pay for broadband?
We've used figures from a survey of nearly 3,000 broadband customers to calculate the annual impact of these price rises for the average low-income customer of each provider. We've defined low-income as those with a household income of less than £21,000 - this fits with the UK government's definition of those on 60% of the median annual income or less.
Our research shows the average low income customer would face a price hike of £52 per year, though customers could see annual increases as high as £77.
Low-income customers trapped by exit fees
Those who are out-of-contract don't have to accept any price rise - they have the right to switch at any time. But if you're mid-contract, you don't have the same option - you're left with no choice but to pay the new higher price, or to pay an eye-watering exit fee to terminate your contract - even though the price rises are based around inflation figures you have little way of predicting when you first sign up.
When we explored the fees low-income customers could face if they wanted to exit their contract rather than accept a price increase, we found some faced a bill of nearly £200. We calculated the exit fee the average low-income customer of each provider with 12 months remaining on their contract could face:
BT EE Plusnet TalkTalk VodafoneMost of the providers base exit fees around the amount you pay each month - the average low-income BT customer pays the largest amount, so faces the largest exit fee. TalkTalk is the exception, it operates a fixed model with the majority of deals having a £10.20 per month remaining termination fee.
What about broadband social tariffs?
Providers know that mid-contract price rises are potentially devastating for financially vulnerable customers - that's why several offer social tariffs with fixed prices that are exempt from annual rises. Social tariffs are discounted packages available for customers who receive certain benefits, such as Universal Credit and Pension Credit.
Our latest research shows that the average low-income customer affected by next month's price rise could save as much as £220 a year by switching to the cheapest widely-available social tariff.
If you're with a provider that offers a social tariff (such as BT and Vodafone), your provider will also waive any termination fees to allow you to move onto their social tariff. Eligible EE and Plusnet customers can also move to BT's social tariffs without having to pay an exit fee.
Providers that don't offer a social tariff - such as TalkTalk - may allow customers to switch away to another provider's social tariff without incurring an exit fee, but this is generally decided on a case-by-case basis. We think all providers should ensure customers don't have to pay early termination charges to move to a social tariff, regardless of whether it means switching to another provider.
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Financially vulnerable customers should be protected
With just weeks to go before record high price hikes on broadband and mobile, take up of social tariffs remains incredibly low. This is largely due to a lack of awareness - we found that three-quarters of low-income consumers are still unaware of social tariffs.
Our previous research also showed that even when customers know about these discounted rates, they may feel unable to switch for contractual reasons - for example, if they would need to break their contract to move to another provider’s social tariff - or they may choose not to switch due to worries about broadband speeds.
That means millions of financially vulnerable customers, struggling to make ends meet, could be left unprotected from the exorbitant hikes providers have announced. We've asked providers to work with the government and Ofcom (the telecoms regulator) to proactively identify financially vulnerable customers.
Rocio Concha, Which? Director of Policy and Advocacy, said: 'With less than two weeks to go until April price increases take effect, it’s hugely concerning that some providers have not taken action to protect financially vulnerable consumers from these hard to justify above-inflation price hikes.
'Telecoms providers must urgently cancel the 2023 price hikes for financially vulnerable customers. They should work to proactively identify these customers and ensure they're not financially penalised, even if they don't take up a social tariff.'
What should I do about the price rises?
If you're already struggling to pay your bills or have concerns about the impact of these price rises, make it a priority to speak to your broadband provider.
Providers that don't offer social tariffs may also allow you to switch away to another provider that does, though you'll need to show you're eligible.
How the providers responded
EE (also responding for BT and Plusnet)Customers who are struggling financially and are eligible for Home Essentials [BT's social tariff] can move penalty free at any point in their contract, this also includes EE and Plusnet customers.
We understand that price rises are never wanted nor welcomed, but recognise them as a necessary thing to do given the rising costs our business faces. With the average price increase just above £1 per week, and over 3 million of our customers exempt from the rise – we’re also doing all we can to ensure our services are accessible to the widest group of customers possible through our market leading social tariffs. ”
TalkTalk VodafoneOur research
Our price rise projections are based on the average amounts paid by customers in a December 2022/January 2023 survey of 2,773 people who had a contract for a home broadband service (including broadband and phone). Data includes a nationally representative sample plus a provider boost approach for brands with low sample sizes.
Price rise exclusions will apply for social tariffs and some financially vulnerable customers.
Our exit-fee calculations for BT, EE, Plusnet and Vodafone are all based around fees faced by a low-income customer paying the average amount as per our survey. For these companies, we followed the example calculation for early termination charges displayed on their website. To get representative figures, we substituted in our average price paid per provider, and scaled the business cost savings deducted according to the difference between this price and the example price. TalkTalk has fixed exit fees which were calculated for a customer with 12 months remaining at the point where prices rise.
To calculate the potential savings for low-income customers if they could take up a social tariff, we used the cheapest widely-available social tariff - Vodafone Essentials Broadband which costs £12 per month.
source https://www.which.co.uk/news/article/millions-of-low-income-broadband-customers-facing-steep-price-rises-a0eDM9g1nbCn