Mobile phone, broadband and pay TV customers could face bill increases of up to 25% in the new year as a result of increases to energy prices.
Energy prices are set to increase just in time to affect inflation figures which are used by many providers to calculate mid-contact price rises.
Companies including BT, TalkTalk and Vodafone add 3.9% on top of the Consumer Price Index inflation rate announced in January. The combined figure is added to customer’s bills in the spring.
Earlier this month, Citigroup predicted that as a result of the energy price increases, inflation could reach 18% in early 2023, exactly when companies will be calculating their annual price rises. The Bank of England previously predicted inflation would reach just over 13% – but that was before the most recent energy price increases.
How do companies increase prices?
The following companies link their annual price rises to a particular formula:
|Company||Rate increase formula (current contracts)||Effective|
|BT, EE||CPI announced in January, plus 3.9%||31st March|
|O2, Virgin Mobile||RPI announced in February, plus 3.9%||1st April|
|Plusnet||CPI announced in January, plus 3.9%||1st March|
|TalkTalk||CPI announced in January, plus 3.7%||1st April|
|Three||4.5% increase (not linked to CPI/RPI)||1st April|
|Vodafone, Talkmobile||CPI announced in January, plus 3.9%||1st April|
If inflation hit 18% in early 2023, this will trigger a price increase of 21.9% for customers of BT, EE, Plusnet, TalkTalk, Vodafone and Talkmobile.
O2 customers face biggest spring bill shock
O2 and Virgin Mobile currently use the Retail Price Index (RPI) measure of inflation to calculate increases. The RPI measure of inflation is higher than the CPI measure. This means O2 and Virgin Mobile customers could face increases of around 25% in April, unless a change in policy is announced.
Built in price rises follow Ofcom clampdown
Most telecoms companies changed their policies regarding price rises a few years ago when Ofcom clamped down on unannounced mid-contract price rises.
Rather than stamping out the practice completely, it led to companies adding price rise clauses into contracts with customers. These often include a pre-arranged formula (see table above) for price increases. At the beginning of the pandemic, inflation was at record low levels, heading close to zero. So companies included an additional 3.9% in their formula on top of inflation.
Among the main mobile networks, only Three has bucked the trend so far, by only having a flat 4.5% increase on contracts, uncoupling price rises from the actual rate of inflation. Tesco Mobile currently explicitly promises not to raise prices mid-contract.
Sky and Virgin Media separately announce their annual price increases for pay TV and broadband services during the first three months of 2023. These are not linked to a specific formula. But earlier this year, both companies raised the prices of some of their services by more than the rate of inflation.
How companies make it difficult to leave
- Bundles: customers may be offered a discount to sign-up to multiple services from one provider. But then they find that each element has a different contract end date, making it difficult to cancel later on.
- Long contracts: 18 and 24 month contracts could have up to two price rises built in. But if you want to leave early, there’s a big price to pay.
- Equipment dependency: the next generation of TV receivers and boxes will often only work if you are connected to an approved router and maintain an ongoing subscription to a particular provider’s broadband service. Access to ‘free’ channels is only maintained if you continue subscribing. In contrast, older boxes can still be used to watch free-to-air channels, even if you ditch your pay TV contract and you can choose which broadband provider you want to use.
- No easy option to cancel: providers can make it very easy to sign-up or add services. But some providers hide or don’t even include options to cancel through online dashboards. Instead, customers are forced to call and wait in a queue to the relevant cancellations department. Once through, staff attempt to retain customers with deals, that may appear to save money, but could lock users in when the next price rise comes.
Therefore, it’s good to be able to plan ahead well in advance, so you can make the most of contract-end dates coming up between now and the spring.
Avoiding the price spiral
Price increases will affect everyone and every business. But in each sector there are companies who don’t (yet) build in inflationary rises in their contracts, or don’t have contracts at all.
Giffgaff (O2), VOXI (Vodafone) and Smarty (Three) are cut-price subsidiaries of their network operator.
They offer SIM-only services without a contract. Customers can choose to stop at any point, and their bundle will end at the end of that monthly billing period.
There are no inflation-linked price rises. As services are pre-paid at the beginning of the billing period, there’s no credit check.
If you want to leave, discontinue your bundle. Before it expires (and you lose your allowance of free text messages) text PAC to 65075. They will send you a code to give to your new supplier, if you want to transfer your phone number across.
Other suppliers that work on a similar basis include Tesco Mobile (Rocket Packs), Lebara and Lycamobile.
The providers that offer the biggest discounts are often those who raise the price the most dramatically during the contract.
In effect, you may never pay the original headline price for very long. Smaller providers including Aquiss, IDNET and Zen Internet offer slightly more expensive deals, but currently don’t increase prices mid-term.
These providers may offer you a router or allow you to choose and buy your own. This means you don’t have the same level of equipment dependency as with some bundled packages.
Then use the TV (if compatible) or a dongle to add extra streaming services. Unlike traditional pay TV services, streaming services will often allow you to sign up on a 1 month rolling basis. You can access Sky channels through NOW, Discovery & Eurosport through Discovery+ and content from Comedy Central, MTV and Nickelodeon on Paramount+, which you can add and then remove, and then re-add when you please.
Please note that unlike Sky or Virgin Media, if you have a problem with your receiving equipment, satellite dish or TV aerial, it’s your responsibility (not Freeview or Freesat’s) to fix. The cost of repairs will almost always work out cheaper in the long-term compared to a pay TV subscription.
Sonali Khan, RXTV