Phone, broadband and pay-TV companies must tell customers upfront and in 'pounds and pence' about any mid-contract price rises, in new consumer protection plans.
The communications regulator, Ofcom, said inflation-linked mid-contract price rises do not provide enough clarity about the prices people will pay, and hamper their ability to shop around for a better deal. The watchdog wants to ban this practice, which it says risks undermining competition.
Melanie Dawes, the Ofcom chief executive, said: “At a time when household finances are under serious strain, customers need prices to be crystal clear. But most people are left confused by the sheer complexity and unpredictability of inflation-linked price rise terms written into their contract, which undermines customers’ ability to shop around.
“Our tougher protections would ban this practice once and for all, giving customers the clarity and certainty they need to secure the best deal for their needs and budget.”
The move comes after research by the consumer group Which? found that the UK’s biggest telecoms providers are lining up above-inflation price increases for broadband and mobile customers that will add almost £500m to consumers’ bills from next spring.
BT, EE, Vodafone, Virgin Media O2 and TalkTalk are to increase bills for more than 22 million broadband and mobile phone customers under mid-contract price rise clauses from April and May next year.
Ofcom also found that take-up of social tariffs more than doubled in the last year, but millions of eligible customers do not know about them.
As of April, two-fifths, or 11 million, broadband customers and more than half of mobile customers – 36 million people – were on contracts subject to inflation-linked price rises. Ofcom expects these numbers to grow further, to about three-fifths of broadband and mobile customers, as Three and Virgin Media apply inflation-linked in-contract price rise terms to more contracts in the coming months.
Between January and October, the watchdog received more than 800 complaints related to price rises, almost double the number during the same period in 2021, many of which highlighted uncertainty created by inflation-linked price rises.
Ofcom has invited comments on its plans under a consultation that will run until 13 February, and intends to publish its final decision next spring. The new rules would come into effect four months later.
This article was written by Julia Kollewe from The Guardian and was legally licensed through the DiveMarketplace by Industry Dive. Please direct all licensing questions to legal@industrydive.com.