Virgin Media broadband prices are expected to rise at a rate well above inflation thanks to the provider’s new "pounds and pence" pricing structure. The cable broadband giant announced this week that, in order to comply with new Ofcom rules, its annual bill hikes will change to a flat increase of £3.50 per month. This replaces the RPI rate of inflation plus 3.9% calculation that has been used in previous years. O2 mobile phone customers will also see their plans increase annually, but by £1.80 a month. Social tariff broadband prices will not go up for Virgin Media customers.
This change follows record rises in recent years as in-contract broadband price hikes have sky-rocketed. The added cost has been compounded by the fact that customers have only been learning the extent of their rise a few months before it takes effect and are then unable to get out of their contract without being hit with additional charges. Moving to a "pounds and pence" price increase should make the overall cost of the deal clearer, but that is likely to be cold comfort to Virgin Media customers locked into a 24-month contract, as they will have been hit with a hike of £7 per month by the end of their deal.
What is a "pounds and pence" price increase?
For many years, broadband prices have increased annually by inflation, plus a set percentage chosen by the provider. For example, in April 2024 Virgin Media customers saw their bills hiked by 8.8%, which was the RPI rate of inflation (4.9%) plus 3.9%. Most other providers also used the 3.9% figure too, but preferred the CPI rate that is historically lower. The relevant inflation figure was usually taken from the December before the increase, so for the April 2024 example, this would have been December 2023.
In an effort to make in-contract broadband price increases more clear – and in response to prominent public campaigning – Ofcom banned inflation-linked price rises for TV, mobile and broadband customers in 2024. The telecoms watchdog argued that inflation-linking “makes it difficult for customers to know what they will pay over the course of their contract”. Instead, from January 2025 any planned increases would need to be a flat hike listed in "pounds and pence".
This change certainly makes it clearer to customers how their bills will change through the course of their contract, but it has not been welcomed in all corners. This is mostly because some customers will see the cost of their broadband rising faster than it would have under the old system.
Will "pounds and pence" price increases make broadband cheaper?
Whether a "pounds and pence" increase is more or less expensive for consumers when compared to the inflation-linked system will depend on inflation fluctuations and how much providers choose to add on. Currently, the £3.50 charged by Virgin Media and the £3 charged by BT, EE and others will likely turn into much higher annual increases than under the old system. For example, someone with a £24 Virgin Media bill (currently the cheapest plan they offer) will see their price rise to £27.50 in April, an increase of just over 14.5%. In order to get such a hike under the old system, December’s RPI would need to be 10.6%, much higher than predictions and the September level of 2.6%.
Flat fees will work out as lower percentages on more expensive plans, meaning those choosing the cheapest plans – who may be the most financially stretched – are taking the biggest relative hit. However, even those who take out Virgin Media’s most expensive broadband package today would pay £39.99 now and £43.49 from April 2025, which is a rise of roughly 8.75%. To match this under the inflation-linked system, December’s RPI would need to be 4.85%. This all means that the switch to the "pounds and pence" system is only likely to benefit those who are already paying a hefty broadband subscription.
Can you switch providers if your bill goes up?
Broadband, TV and mobile bill payers will rightly feel frustrated that the price they agree to when they sign up to a deal is not the one they will be paying by the end. Additionally, customers unhappy with an increase will likely not be able to cancel their contract for free, as they have technically agreed to the price rise when they signed up.
In order to get out of the contract, you would need to pay an early termination fee. We explain more in our article ‘Broadband mid-contract price increases: Can you dodge the price hike?’. If you are out of contract, you may want to consider securing the cheapest possible deal with future price rises in mind. Our article ‘How to switch broadband provider’ is the best place to start.
