Broadband customers won't face annual price rises linked to inflation, which triggered price spikes of as much as 14.4% earlier this year, under the latest plans outlined by regulator Ofcom
Industry regulator will ban annual price hikes linked to unknown future inflation figures
Broadband firms could be blocked from increasing prices during your contract under new plans outlined by Ofcom. The proposals are designed to halt broadband suppliers from tying annual price rises to runaway inflation figures — potentially reducing monthly bills for millions of customers.
Several of the biggest broadband suppliers increased prices by as much as 14.4% earlier this year. If you paid £30 per month for your internet connection, that inflation-fuelled rise equates to an extra £51 each year.
Four in every 10 broadband customers were on inflation-linked contracts in April this year, Ofcom analysis revealed. But despite the prevalence of these broadband plans, Ofcom found that most customers had very little knowledge of the exact details.
Just 16% of broadband customers surveyed by Ofcom knew their monthly bills could rise, and that any increase would be linked to inflation with an additional percentage added on top.
Inflation, a rough measurement of how quickly the prices of products and services that average people buy are rising, has run rampant over the last two years. One measure of inflation, the Consumer Price Inflation (CPI), peaked at 11.1% in October last year. That means that between November 2021 and October 2022, the prices of what the average Briton bought rose on average by 11.1%.
Several broadband suppliers increase prices in line with CPI or RPI (Retail Price Index, another measurement of inflation) each year, typically in April. An extra percentage is also added, varying between 3.7% for TalkTalk customers up to an additional 3.9% for BT, EE, Plusnet, and Vodafone customers. Sky raised broadband bills by an average of 8.1% for customers nationwide.
Under new rules enforced by Ofcom, mid-contract rises linked to nebulous figures, like CPI or RPI, have been effectively outlawed. Broadband companies will still be able to increase prices mid-contract, but the new rules will require them to tell customers precisely how much extra they'll need to spend.
Broadband firms will need to spell out the exact amount customers need to pay each year as prices rise throughout the minimum contract term, the industry regulator has ruled. Most broadband suppliers sign-up customers to a contract term between 12- to 24-months.
The change will block price rises linked to unknown future inflation values or percentages.
In an example provided by Ofcom to demonstrate the new rules, it said a previous advert stating that a broadband plan that costs £30 per month but would rise by “CPI plus 3.9%” would have to change.
Under the new rules, the advert would need to read: “Monthly subscription price: £30.00 until March 31, 2024. Increasing to £31.50 on April 1, 2024 and £33.00 on April 1, 2025."
Ofcom chief executive Dame Melanie Dawes 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.”
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Matthew Upton, acting executive director of policy and advocacy at Citizens Advice, said: “Banning inflation-linked, mid-contract price rises is a much-needed move from Ofcom. Every day our advisers hear from people whose budgets are pushed to the limit. It’s so much harder to manage your money with unpredictable mid-contract surges in the mix.
“But these proposals still leave the door open to providers putting ‘prices may vary’ small print in their contracts. While consumers can technically leave penalty free, we know that this is not the reality.”
However, TalkTalk has spoken out about the Ofcom review. The broadband supplier, which relies on infrastructure from BT-owned Openreach to deliver internet to its customers, claims that CPI indexed price rises charged by the wholesale provider should be under the spotlight too.
Speaking to GB News, Tristia Harrison, TalkTalk Group CEO, said: "For 20 years TalkTalk has focused on delivering value for customers in the vibrantly competitive UK broadband market.
"If Ofcom is to push ahead with tying industry’s hands on CPI indexed price inflation, we urge them to urgently review similar CPI inflation for BT Openreach at a wholesale level. The link between the two is obvious; is essential for protecting both consumers and competition, and needs addressing."
