Are broadband activation fees making a comeback?

For years, broadband providers competed to make switching as frictionless as possible. Now, BT Group has brought activation fees back. How are AI, increasingly sophisticated routers, and easier switching changing the economics of customer acquisition?

BT Group’s consumer brands BT, EE and Plusnet have reintroduced one-off activation fees for new home broadband services.

Since 31 July 2026, new customers have had to pay a £30 activation fee for a new BT or EE service, while Plusnet customers now pay £20.

Broadband activation fees are one-time charges that new customers incur when signing up, covering the costs of setting up the service, including provisioning and the supply of necessary equipment, such as a router.

During the second half of the 2010s, as broadband competition intensified, many providers removed activation fees and offered “free” routers, relying on long-term contracts to recover their customer acquisition costs over time. Ofcom’s Pricing and Consumer Engagement report from February this year found that only four out of 21 broadband providers in its comparison were still charging set-up fees as of September 2025.

If supplying every new customer becomes significantly more expensive as router costs rise, recovering some of that expenditure immediately rather than across a 24-month contract becomes more attractive. One Touch Switch, launched in 2024, has also made changing broadband provider considerably easier, reinforcing the appeal of recovering acquisition costs earlier in the customer relationship.

Yes, AI is, in part, to blame.

Routers haven’t been immune to rising hardware prices. The AI boom has intensified demand for memory and encouraged manufacturers such as Samsung, SK Hynix and Micron to prioritise higher-margin High Bandwidth Memory (HBM) for AI servers, adding to broader supply constraints affecting dynamic random-access memory (DRAM) and NAND flash.

The price of consumer-grade memory used in broadband equipment has risen almost sevenfold over nine months. Memory now accounts for more than 20% of the bill of materials for a low-to-mid-end Wi-Fi router, up from 3% a year earlier. Routers are produced in very high volumes on tight margins, so such a sharp increase in the price of a key component can substantially affect equipment costs for ISPs.

Modern broadband gateways can optimise Wi-Fi performance, support mesh networking and cybersecurity services, integrate smart home devices, and manage dozens of connected devices efficiently. Some newer, AI-enabled platforms can also run machine learning models locally rather than relying entirely on the cloud.

As such, router costs were already increasing as operators transitioned to more capable Wi-Fi 7 gateways. But the memory shortage provides a plausible justification for the return of activation fees, if not the sole reason.

Higher DRAM and NAND prices did not make an activation fee inevitable – BT could instead have reduced introductory discounts, cut voucher offers, increased monthly prices or absorbed lower margins. The fact that it chose to reintroduce an activation fee suggests a broader commercial decision about how much of the overall acquisition cost should be paid up front by new customers, rather than a direct pass-through of higher router costs.

Activation fees are only one element of the economics of acquiring a broadband customer. Providers also incur expenditure on marketing, provisioning and equipment, much of which has traditionally been recovered through monthly charges over the lifetime of the contract. An activation fee allows them to recover part of that expenditure up front, reducing the amount that must be recouped over time.

At the same time, the router has evolved from a low-cost piece of networking hardware into a sophisticated gateway that improves customer experience and supports premium services long after activation. That evolution creates scope to monetise the gateway through hardware tiers and managed Wi-Fi services, rather than treating it simply as a fixed acquisition cost.

The return of activation fees could be an early indication that broadband providers are moving away from heavily subsidised acquisition models and towards flexible, profitability-focused commercial strategies. Operators will increasingly need to mix and match activation fees, premium hardware tiers, managed Wi-Fi subscriptions, bring-your-own-router options and loyalty discounts to reflect changing customer preferences and market conditions.

Supporting that level of commercial agility requires a product catalogue, pricing engine and CRM platform that allow operators to adapt their offers as quickly as the economics of customer acquisition evolve.

The more important signal is therefore not the activation fee itself, but the move towards treating activation charges, hardware tiers and service options as configurable elements of the broadband proposition.

With Cerillion’s pre-integrated BSS/OSS suite, operators can configure and launch flexible broadband offers – from activation fees and hardware tiers to managed Wi-Fi services and targeted discounts. Get in touch to find out more.