Pay it their way: the impact of mid-contract price rises on phone & internet bills

Pay it their way: the impact of mid-contract price rises on phone & internet bills
As millions of UK customers face a shocking mid-contract price rise this month, in the midst of a cost-of-living crisis, why are telcos allowed to get away with this, and will actions being taken to protect customers measure up?

Ofcom has launched an industry-wide investigation into the inflation-busting, mid-contract price rises that the UK’s biggest telcos are levying on their broadband and mobile customers, that could bring in protections against future increases of this type.

Why are these mid-contract rises going through during an ongoing squeeze to living standards? We aren’t too sure, other than that everyone is doing it, and now millions of mobile and broadband customers of BT, Vodafone, and Three face a mid-contract rise of 14.4%, based on the rate of inflation pegged to the consumer prices index (CPI) – currently at 8.8% (though down from 9.2% in December 2022), plus 3.9%.

These rises aren’t confined to the UK either; Verizon customers in the US have similarly been hit by mid-contract price rises, supposedly due to an increase in “administrative costs” of “complying with regulatory requirements,” rather than due to inflation.

Though driven largely by factors outside of the telecoms industry, faced with years of gradually declining revenues as incomes fall and infrastructure expenditures rise, this hasn’t stopped telcos also ratcheting up prices.

Even if predictions made back in September 2022 of 18% inflation by early 2023 haven’t materialised, telcos can still look forward to a £1.4 billion windfall, thanks in no small part to the almost 20% of the UK population paying £30 or more per month for connectivity:
How much money do you typically pay your mobile network provider each month?

Ofcom’s investigation will look into telecom sales practices after complaints that customers were entering into new mobile or broadband contracts without being sufficiently informed of mid-contract price rises either by marketing campaigns or during the sign-up procedure.

New contracts are subject to a cooling-off period of 14 days, letting users bow out without incurring a penalty. Beyond this, the service provider must give 30 days’ notice to customers if they plan on putting up the price of the contract, and unless they were informed at the start of the contract that the price would be going up, customers can cancel within those 30 days without incurring a fee.

However, if prices change due to inflation and the contract states this, consumers cannot cancel without paying punitive exit fees of up to £200 or more if they try to switch, often the remaining cost of the contract.

Ofcom states that providers must include any potential future price rise in a contract at the point of sale, detailed “prominently and transparently.” If a customer does not agree to the terms, and this is deemed to be because the terms were not made with enough clarity and visibility, then providers should have both notified them about price increases and offered the option of exiting penalty-free.

Ofcom’s General Condition 9.6 – the “material detriment” requirement – states that, in choosing a deal, price is a key determiner of whether the subscriber would have entered into that contract or not. As such, any increase to the agreed subscription price (other than passing on increases to VAT) during a contract is considered detrimental to the customer’s capacity to make an informed decision.

The Committees of Advertising Practice (CAP) launched a consultation scrutinising telecoms companies’ communications about looming price rises in their campaigns. Under Advertising Codes, any advertising material should make the possibility of price rises abundantly clear so prospective customers can make an informed decision, as the “perceived complexity of products… and resulting lack of trust, can be a barrier to consumer engagement with these products and their ability to obtain the right product for their needs.”

Hyperoptic has come down hard on its rival UK telcos, taking aim at “disgusting” mid-contract rises in a new ad campaign with CEO Dana Tobak calling for changes to the way mid-contract prices are advertised to consumers:

BT, and its subsidiaries EE and Plusnet, have been singled out in particular over the group’s failures to give customers information about contract price rises and the right to withdraw early, snowballing from an investigation opened by Ofcom into EE back in October, into one now looking at BT’s broader practices.

Rising inflation has left a third of households in the UK struggling to afford connectivity services. In the current financial climate, telcos must ask themselves – are these price rises necessary right now? Telcos must consider the variety of deals available on the market, and the different circumstances that customers on these various contracts may face; price increases could well trigger a review of whether people need these services or not, costing telcos more due to a rise in cancellations.

Monthly cost is one of the top considerations for consumers when choosing their contract, so, in the event of any rise, changes to charges should be stated clearly, concisely, and prominently in any advertising, with users able to easily access their contract terms via mobile app or self-service portal.