Ofcom, the telecoms watchdog estimates that as of April 2024, around six in ten broadband and mobile customers were on contracts subject to inflation-linked price rises. Ofcom has long stated that the practice 'makes it difficult for customers to know what they will pay over the course of their contract'. New rules, announced by Ofcom today, mean that mid-contract price increases linked to inflation will be banned from January 2025. Ofcom’s telecoms policy director, Cristina Luna-Esteban said, “We’re stepping in on behalf of phone, broadband and pay-TV customers to stamp out this practice, so people can be certain of the price they will pay, compare deals more easily and take advantage of the competitive market we have in the UK". The new rules mean that from January 2025, any price rise written into a customer’s contract will have to be set out in "pounds and pence". It must also be displayed "prominently and transparently" at the point of sale"; and providers must be clear about when any price changes will occur.
Why have the new rules come in?
Ofcom states that the current pricing practice of applying mid-contract price rises linked to inflation 'leaves customers without sufficient certainty and clarity about the prices they will pay, and unfairly assuming the risk and burden of financial uncertainty from inflation, which is something people cannot predict and do not understand well'.
Ofcom’s telecoms policy director, Cristina Luna-Esteban, said: “With household budgets squeezed, people need to have certainty about their monthly outgoings. But that’s impossible if you’re tied into a contract where the price could change based on something as hard to predict as future inflation"
The change ensures that providers have to communicate future price rises clearly and means that mobile, broadband and pay TV customers will now know how much their bill will rise each spring, in pounds and pence.
What does the Ofcom ban mean for mobile, broadband and pay TV customers?
Until now, mobile, broadband and pay TV bills would usually go up in price each spring, most commonly at a set rate of 3.9% plus the rate of inflation for the previous December. We explain more about this pricing practice in our article mid-contract price increases for 2024, where we list the increases applied by the likes of BT, EE, Plusnet, Virgin Media, Vodafone and TalkTalk. While this practice may seem unfair, most major providers include details of mid-contract price rises in their terms and conditions, meaning that customer were agreeing to them when they signed up. Inflation-linked price rises came into sharp focus and drew widespread criticism in 2022 as providers including BT, EE, Vodafone, Three and Plusnet all increased bills by 14.4%, the biggest round of price rises for more than 30 years.
What are the new rules?
Ofcom's new rules state that:
"Any price rise written into a customer’s contract from January 2025 will need to be set out in pounds and pence, prominently and transparently, at the point of sale; and providers will need to be clear about when any changes to prices will occur".
Will the new rules curb the price rises?
Not necessarily. The new rules are primarily to protect consumers from signing up to contracts that are unclear. In theory, a provider is free to add whatever mid-contract price rise it deems appropriate, it just needs to display it prominently, in pounds and pence and be clear about when any price changes occur. In April 2024, Virgin Media applied an 8.8% increase, which on a £30 per month contract equates to an increase of £2.64 per month. From January 2025, any price rises will need to be communicated in pounds and pence and so Virgin Media could, in theory, apply a blanket £3 per month increase, which is potentially higher than an inflation-linked price hike.
BT was the first major broadband and mobile provider to announce "pounds and pence" price increases. Mobile customers can expect an increase of at least £1.50 per month from April 2025 while broadband customers will have to pay at least £3.00 extra per month. The new rules mean that other providers will need to follow BT's lead and produce updated terms and conditions that confirm any future mid-contract price increases in pounds and pence.
