The regulator Ofcom has today set out new rules that mean UK phone, broadband and pay TV firms must clearly set out price rises in contracts at the point of sale. They also need to be clear about when changes will occur.
The inflation-linked, mid-contract price hike ban takes effect from 17 January 2025.
Currently, several providers’ contract terms allow for an annual price rise linked to future inflation – either the Consumer Prices Index (CPI) or Retail Prices Index (RPI) – plus an additional percentage, typically 3.9%.
As of April 2024, Ofcom estimated that around six in 10 broadband and mobile customers were on contracts subject to inflation-linked price rises.
Last year, it was estimated 11 million broadband and mobile customers saw bills hiked by up to 17.3% under this practice, which prompted the regulator to launch a review of inflation-linked mid-contract price rises.
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It said these terms leave customers “without sufficient certainty and clarity about the prices they will pay”, with many people not understanding inflation or having low awareness of CPI and RPI.
Cristina Luna-Esteban, Ofcom’s telecoms policy director, 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.
“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.”
Under current Ofcom rules, providers that specify price rises in contracts from the start must make this clear before customers sign up. If they don’t, they must give customers one month’s notice and the right to exit penalty-free when they increase prices mid-contract.
Just last week, Plusnet announced it will calculate bill increases using a new pounds and pence model, in a bid to make its pricing clearer for customers. It followed in the footsteps of Vodafone, which confirmed that from 2 July, all new contracts will include details of pounds and pence cost increases.
‘Customers will make informed choices’
Richard Neudegg, director of regulation at Uswitch.com, said the price hikes left customers without escape, so the new rules will bring some much-needed clarity and certainty.
“Finally, broadband and mobile customers will know ahead of time exactly what they will pay for the duration of a contract, making it easier for them to properly manage their finances.
“This change will allow people to make informed choices at the start of their deal instead of being at the mercy of future inflation rates that are impossible to know in advance.
“We have already seen providers such as BT/EE, Plusnet and Vodafone get ahead of this announcement and adopt the ‘pounds and pence’ model for mid-contract price rises.
“Providers have so far opted to switch to a flat-rate approach to price rises, regardless of the cost of the package, which will be harsher as a proportion for many customers who are on cheaper or even average-priced contracts,” he said.
Neudegg added that while Ofcom’s decision means the total cost of your contract will be clear from the get-go, “we need to see how each provider will apply this in their pricing, so it’ll still be vital for customers to consider their options.
“It’s also important to be aware that Ofcom’s rule change will only apply to new contracts, and only for new contracts taken from 17 January 2025. It is disappointing that Ofcom has chosen to give longer for implementation than originally proposed.”
