The UK Government has confirmed it has no plans to ban mid-contract price rises, despite DSIT Secretary of State Liz Kendall recently writing an open letter to Ofcom urging the regulator to “look at in-contract price rises again”.
Mid-contract price increases are applied to most long-term broadband deals. Earlier this year, the industry adopted a new policy requiring providers to state any future price rises in pounds and pence, replacing the previous system of inflation-linked increases.
The intention was to make annual rises clearer and more transparent for customers. However, many broadband providers have instead used this change as an opportunity to introduce significantly higher increases, in some cases far exceeding the rate of inflation.
O2 went even further by applying its new price-rise structure to existing customers who originally signed up under inflation-linked terms. This move prompted the open letter from Liz Kendall and Chancellor Rachel Reeves, who also called on telecom providers to “reinforce” their commitment to treating customers fairly.
The issue resurfaced in the House of Commons, where Lord Sikka asked what steps the government is taking to ensure broadband and mobile price increases are fair. He highlighted that O2 had raised prices outside what many customers had agreed to in their terms and conditions.
Responding on behalf of the Government, Parliamentary Under-Secretary of State for Business and Technology, Baroness Lloyd of Effra, said:
"My noble friend is right to highlight the importance of the ability to have the right contract and of giving consumers the information they need. We have no plans to ban in-contract price rises, but consumers have the right to leave, penalty-free, for 30 days from when unexpected price rises are announced by a provider. The Chancellor and Secretary of State asked Ofcom to review the suitability of the current 30-day notice period, to ensure that it can be enacted by consumers who experience unexpected and unannounced mid-contract price rises."
What Broadband Genie had to say:
"Unfortunately, no one appears willing to step in to protect UK bill payers at a time when household budgets are already under severe pressure. Providers are taking advantage of consumers, particularly the most vulnerable. This will only continue while mid-contract price rises remain allowed.
"We expect more providers to follow O2’s lead in introducing unexpected mid-contract increases, and customers on the most modest, budget-friendly deals will be hit the hardest.
"This is weak governing by the UK Parliament, compounded by poor regulatory oversight from Ofcom. The telecom's regulator must step up and provide meaningful consumer protection. Ofcom should move beyond guidance and outright ban mid-contract price rises to prevent customers being unfairly penalised for services they are already paying for."
- Alex Tofts, broadband expert at Broadband Genie