Mid-contract Telco Price Hikes Must End, Ofcom Told

UK telcos are facing complaints about mid-contract price rises, with 87 percent of consumers saying they should be allowed to simply walk away with no penalty if their provider hikes charges this way. Uswitch and Which? are also calling on Ofcom to end mid-contract hikes altogether.

Millions of customers on broadband and mobile contracts are expected to face bigger bills from April, according to price comparison site Uswitch, which thinks operators should commit to clearer pricing at the start of a contract.

The price increases – likely to be announced in January – are thought to be in line with inflation. However, Uswitch warned of a growing trend among mobile and broadband providers to bump prices by inflation plus an extra amount, sometimes as much as 3.9 percent on top.

Some 85 percent of customers think mid-contract price rises are unfair, and 87 percent believe they should be allowed to ditch their provider if they raise their prices mid-contract, according to a survey conducted for Uswitch by research agency Opinium.

While customers in theory have the right to leave with no penalty over a price hike, this only applies if they were not made aware of potential rises when they signed the contract.

In reality, many customers face exit fees to leave if their provider has told them their prices will rise in line with inflation (plus a fixed percentage), even though customers cannot reasonably predict what inflation might be in the future, Uswitch said.

Uncertainty over how much prices might go up has led to 62 percent of respondents saying they plan to leave their current provider at the next opportunity if hit by a rise, with 71 percent saying they would choose a provider that doesn't up charges mid-contract if given the option.

In fact, 75 percent of respondents said they agreed they would be put off a new mobile or broadband deal if they knew prices were going to rise mid-contract, according to Uswitch.

"We're calling for an end to the practice of inflation-linked annual price rises in broadband and mobile contracts," said Uswitch spokesperson and Head of Broadband and Mobiles Ernest Doku.

This should be addressed urgently, he added, in light of the fact that inflation is at a much higher level than it has been for years. "It's time for Ofcom to intervene," he said.

Consumer organization Which? voiced a similar complaint, highlighting unpredictable mid-contract price moves and calling on Ofcom to ban the practice altogether.

• 22 million Brits suffer broadband outage blues and are paying a premium for it
• Ofcom attempts to thread the needle in net neutrality update
• UK to crack down on imported Chinese optical fiber cables
• Progress towards 'Gigabit Europe' is slow, with UK also lagging

It said the big four mobile operators – EE, O2, Three, and Vodafone UK – account for 68 percent of the UK mobile market and all raise prices every April in line with either the Consumer Price Index (CPI) or the Retail Price Index (RPI), plus an additional 3.9 percent.

It claims the telcos offer no detailed breakdown of how this additional figure is calculated or justified, yet customers are charged exit fees of up to £300 to get out of their contract early if they are unhappy.

Which? said it expects the bills for customers of EE, Three, and Vodafone to jump by more than eight percent from next April, while O2 customers could see rises of more than ten percent.

Coming on top of the increases of more than 17 percent faced by many consumers earlier this year, Which? calculated that a customer who took out a SIM-only 24-month contract in November 2022 will end up paying £124.21 more than they had initially expected over the life of the contract if they are on Virgin Media O2.

For EE customers the figure is £102.17, while it is £87.57 for Three, and £80.27 for Vodafone.

Rocio Concha, director of policy and advocacy at Which?, said in a statement that a decent broadband and mobile connection is "essential to modern life," and unpredictable mid-contract price hikes obfuscate prices and undermine competition.

"Which? is calling on all providers to do the right thing and cancel 2024's above inflation price hikes. Ofcom should also use their review to finally ban these unjust mid-contract price hikes that harm consumers and undermine competition. Consumers need to know exactly how much their contract will cost when they sign up."

Ofcom is reviewing inflation-linked, mid-contract price rises and is expected to set out its findings before the end of the year, and invite views on the matter.

A spokesperson at Virgin Media O2, told us: "We only apply price increases to the airtime part (data, minutes, texts) of a customer's bill, whereas many other providers apply price increases across the whole bill (including a customer's device). This means that our customers see lower price increases overall than those of most competitors.

"Taking that into account, the effective average price increase for O2 and Virgin Mobile customers this year was 10.0%, or less than 10 pence per day.

"As you may know, we are campaigning on the need for other operators to offer split contacts and automatically and fully roll customers down at the end of their plan to give them a fairer deal. This is because literally millions of mobile phone customers are being charged for phones they already own – to the tune of over £500m a year – and 93% are unaware it's happening. This is costing the average customer around £200 a year, which far outweighs the impact of any price increase in monetary terms."

As for the price rise on top of inflation? The company says it invested £2 billion in adding 5G network coverage to 1,600 towns and cities across the UK in 2022.

"An inflation-only metric would provide no additional headroom for this continued investment, which is why we add a small amount (3.9%) on top."

Vodafone UK used the same rationale for price rises, saying they are "essential" to invest in its network.

"We have maintained transparency with our customers regarding annual price adjustments, ensuring they understand what they are committing to before signing the contract. We do this through a series of touchpoints, including contract summaries, customer journeys, and clear and highlighted terms and conditions.

It is "too early" to comment on any price rise next year, a spokesperson added. "We were the first network to launch social tariffs for both mobile and fixed services, where eligible customers can access both for just 72p a day, in addition to offering a range of affordable mobile and home broadband plans. We've also frozen prices for customers registered as financially vulnerable."

EE Consumer told us: "We understand that price rises are never wanted nor welcomed but recognise them as a necessary thing to do given the rising costs our business faces.

"Our price rises are annual, contracted and transparent and we make this clear when customers sign up or renew their contract. With the average price increase just above £1 per week, and 2 million pay as you go customers were excluded from price changes in 2023 – we're also doing all we can to ensure our services are accessible to the widest group of customers possible through our market leading social tariffs."

We asked Three to comment but it had not responded at the time of publication. ®