Ofcom’s review of the pricing practice concluded that inflation-linked mid-contract price rise terms can cause substantial consumer harm by making it more complicated to choose a broadband or mobile deal, limiting consumer engagement in the market and reducing competition in the industry.
The regulator’s finding comes after a Which? campaign called for unpredictable mid-contract price rises to be banned, and for providers to voluntarily end the practice. Our research has shown that the pricing terms can unfairly penalise customers, who can be charged substantial amounts more than they signed up to. These rises make it almost impossible for people to predict how much their broadband or mobile contract will cost and dampen price competition in the telecoms market.
The Right to Connect: join our campaign to end unpredictable mid-contract price rises for broadband and mobile customers –What Ofcom said about mid-contract price rises
Back in February, Ofcom said it would review whether inflation-based mid-contract price rises give broadband and mobile phone customers enough certainty about how much their deal will cost. Its aim was to explore whether intervention was required to give customers greater transparency and clarity about how much they will pay when they take out a contract.
It also published preliminary research showing that a third of customers aren't clear on whether their price is likely to rise, and more than half do not know what CPI (Consumer Price Index) and RPI (Retail Price Index) measure.
Alongside today’s announcement, Ofcom published a report outlining its concerns around mid-contract price rises:
Choosing a dealThe number of customers affectedPrice transparency -In its report, Ofcom cited concerns that unpredictable mid-contract price rises limit consumer engagement and reduce effective competition in the broadband and mobile markets. It noted that these price increases push the burden of financial uncertainty from inflation onto consumers at a time when households are already struggling to manage costs.
New broadband and mobile pricing rules proposed
Under Ofcom’s proposals, inflation-linked mid-contract price rises would be banned. Providers would also be prevented from including percentage-based price rise terms in all new contracts.
If providers wish to increase the amount customers pay over the course of their contract without also giving customers the right to exit, they would be forced to set this out prominently in pounds and pence, at the point of sale. Providers must also clearly outline when any changes in price would occur.
Ofcom has opened a consultation on its plans which will remain open until mid-February 2024. Its final decision on the unpredictable mid-contract price rise ban and its new pricing rules will be published in spring 2024, with the rules coming into effect four months later.
What's the issue with mid-contract prise rises?
Mid-contract price rises are usually based around the Consumer Price Index (CPI) or the Retail Price Index (RPI), with an additional percentage tacked on. Most of the UK’s largest providers have introduced them - the list includes BT and EE, Virgin Media and O2, TalkTalk, Three and Vodafone.
These price rises are baked into consumer contracts, so customers face a lose-lose choice between accepting an exorbitant price hike or paying a punitive exit fee. This year, inflation meant that some customers of major telecoms providers saw price increases of nearly 18%.
The issue isn’t only the size of the increase though, there’s also a lack of clarity for customers shopping for a new deal. Because they are based on future inflation rates, consumers are unable to tell the total cost of their contract when they sign up.
Only a handful of the UK's larger telecoms providers, such as Hyperoptic, Utility Warehouse and Zen Internet, promise to keep your price the same for the full duration of your contract.
Why Which? has called for mid-contract price rises to be banned
Rocio Concha, Which? Director of Policy and Advocacy, said: 'Ofcom proposing to ban unfair and unpredictable mid-contract price rises is a huge win for consumers. Which? has spearheaded the campaign to protect millions of households from being blindsided by these huge price hikes by telecoms firms.
"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.'
While we support the outcome of this review from Ofcom, alone it won’t be enough to stop the price increases providers have planned for spring 2024. We’ll continue to campaign for telecoms providers to do the right thing by stopping this practice voluntarily, ensuring that customers are not impacted by unfair price rises next April.
News, deals and stuff the manuals don't tell yousource https://www.which.co.uk/news/article/regulator-proposes-ban-on-unpredictable-broadband-and-mobile-mid-contract-price-rises-a4hvp0J2IWua