Ofcom could soon step in to save customers from mid-contract price hikes, weeks after providers announced increases of over 14%.
Since 2020, most phone and broadband companies have moved to annual price rises based on inflation + 3.9%. Back when this price rise formula was first introduced, inflation was closer to 1.5%.
As a result of recently announced increased price rises, there are fears that the cost of essential broadband and phone services is becoming unaffordable for some households. The rise of internet-based TV and streaming services is producing a double price whammy as some pay TV and streaming services also adjust prices.
Ofcom has now launched a review to see if additional protections are needed. Previously, Ofcom had allowed customers to exit a contract if there was a price rise. Providers got around this by inserting a clause into the contract permitting them to increase prices based on a set formula (linked to inflation) when customers signed up.
Research by Ofcom indicates up to a third of phone and broadband customers are unaware that providers can increase contracts mid-contract. And there are concerns that price rises are not clearly indicated when customers sign up. As most providers increase prices in March or April, prices advertised to new customers during the winter are normally only valid for the first few months of a contract. For the majority of the time, higher prices are due.
Cristina Luna-Esteban, the director of telecoms consumer protection at Ofcom said
“We’re taking a thorough look at these types of contract terms to understand fully the extent to which customers truly know what they’re signing up to, and whether tougher protections are needed. Customers need certainty and clarity about what they will pay over the course of their contract.”
Meanwhile, Sky has told its TV and broadband customers to expect an average 8.1% rise this April.