Broadband and mobile phone mid-contract price hikes investigated

Customer complaints suggest suppliers aren’t being transparent enough about increasing bills mid contract.

Are mobile and broadband providers being clear enough about the mid-contract price rises they can impose on customers? A new investigation from Ofcom is set to probe this issue, after concerns were raised by complaining customers.

While it’s easy to focus on the increases to those biggest expenses, like our mortgages, food and energy bills, it’s important not to overlook the larger amounts we are having to pay for our phone and broadband services.

Indeed, there are sufficient concerns around those particular price hikes that now the regulator has launched its own probe.

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Probing price rises

Last week Ofcom, the communications regulator, revealed it was launching an “industry-wide enforcement programme” as a result of price rises from phone and broadband providers.

After analysing complaints about the issue from customers, the regulator said it was concerned that people who took out contracts between 1 March 2021 and 16 June 2022 may not have been given clear information about mid-contract price rises.

And it warned that individual suppliers are going to need to prove that they are being sufficiently transparent or else face punitive consequences.

What are mid-contract price rises?

When you take out a mobile phone or broadband deal, you will pay the same amount each month for your package for the length of that contract.

Or at least that’s what you might expect to happen.

The reality may be rather different however since many providers write it into your contract that they are able to hike your bill each year in line with inflation.

For example, if you are an O2 mobile phone customer, then your airtime plan will go up by the retail price index (RPI) measurement of inflation plus 3.9% from April each year.

EE customers meanwhile have their bill increased by the consumer price index (CPI) measurement of inflation plus 3.9%.

Announcing its probe, Ofcom said it expects that the potential for such price rises should be set out “prominently and transparently” at the point of sales.

In other words, it should be absolutely clear from the outset that your monthly bill price will likely go up each year. 

If the customer hadn’t agreed to those terms when signing up, because they weren’t clear enough, then suppliers should notify them of the price increase and offer the chance to leave the contract without paying a penalty.

Suppliers will have to show how they have made those terms prominent and transparent or face an individual investigation.

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Do all suppliers include mid-contract price rises?

It’s worth pointing out that there are some big differences in the ways that these price hikes are handled.

First and foremost, not all suppliers have them. Virgin and Sky for example don’t have such price increases included in their contract, meaning that if they do opt to increase prices, customers are able to leave without having to pay an exit fee.

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But as you can see from the examples above, there isn’t even uniformity among providers on which measurement of inflation to use.

RPI is virtually a dead measurement anyway, given its inaccuracy ‒ the fact that it is always higher than CPI makes it even cheekier for providers to use it for these price increases.

And then there is the fact that it’s not entirely accurate to state that the price hikes are in line with inflation.

They don’t go up by the actual inflation measurement, but a couple of percentage points above that. For example, CPI right now is an eye-watering 11.1%.

It’s bad enough to think of your phone bill going up by that much, but with EE it would go up by a further 3.9%, meaning a 14% rise!

loveMONEY says: an unpleasant surprise

Bill rises are never welcome but are going to be a particular concern when money is already stretched.

A separate study from Ofcom found that around a third of us are having problems paying for our phone, broadband, pay TV and streaming bills.

That’s double the level of April 2021, and equates to around 9.1 million households.

I’m not surprised that there are concerns around how open providers are about these bill hikes.

I know that I’ve been caught out by these in the past ‒ even if it is mentioned when you first take out the contract, it’s easy to forget about that fact in the months thereafter.

To be honest, I’m not sure how such increases are even justifiable.

My mortgage lender doesn’t increase rates every year in the middle of my fixed rate, for example. Why are communications firms special?

It’s welcome that Ofcom wants to make sure providers are being sufficiently clear, but if it really wants to protect customers it should ban such mid-contract price rises entirely.