BT will scrap mid-contract price rises linked to inflation for all UK customers.
The dramatic shake-up comes as regulator Ofcom threatened to ban the practice, which sees monthly bills increase based on the current inflation rate. These occur during customers' initial contract term when they cannot switch to another provider.
If you're a BT customer, your bills will still increase every year — but consumer chief Marc Allera says to expect a rise of roughly £1.50 for mobile contracts and £3 for broadband. These rises will be spelt out in "pounds and pence, prominently and transparently" rather than linked to nebulous inflation measurements, BT has confirmed.
Until now, BT has always relied on the Consumer Price Index (CPI) published by the Office for National Statistics (ONS) in January to calculate its annual price rise.
Customers would see their monthly bills rise by 3.9% plus the CPI figure. With the latest ONS figures already published, it's possible to calculate the price rise set to hit BT customers in the coming weeks.
With spiralling inflation rates in the UK, the previous method of calculating annual price rises has seen broadband customers forced to stomach vast increases to their monthly bills.
Last year, BT broadband users were hit with a 14.4% rise. If your BT bills are usually £30 per month, that 14.1% increase added an extra £51 to the cost of your internet connection over 12 months. Ouch.
BT has confirmed an overhaul of the way it calculates annual price rises for mobile and broadband customers across the UK
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With the latest changes, inflation will have no bearing on your broadband bills. The bad news? The new policy from BT won’t come into force until summer 2024.
If you’re currently with BT, you’ll face one more annual price rise linked with inflation at the end of March 2024. The new calculation will take effect by the time the 2025 price rise comes around.
Speaking about the changes, BT’s Marc Allera wrote in the blog: “We are continually thinking about how we — and the wider industry — can play our part alongside policymakers to drive meaningful change, at a time when we can see so many people under pressure.”
“Ofcom is proposing an amended regulation requiring that any price change written into a customer's contract needs to be set out in pounds and pence, prominently and transparently, at the point of sale. That includes being clear about when any changes to prices will occur,” Allera adds “We're listening, and we've taken this on board.”
Defending the need to increase prices for existing customers, the BT consumer chief reveals that data consumption has trebled in the last five years alone. With the roll-out of 5G networks, smartphones can achieve faster download speeds — often beating the average home broadband speeds — and stay connected in busy areas, like packed stadiums and busy train stations. This makes it easier to stream video, make video calls, download music, and back-up photos and data.
At home, with more Britons turning to streaming services like Netflix, Disney+, and Prime Video for their favourite television shows, catching up on missed shows with BBC iPlayer and ITVX, and video games file sizes expanding rapidly...broadband usage per household has dramatically increased.
"All this, while telco services continue to make up only a small and declining share of household outgoings, representing just 3.5% of average monthly basket spend.In real terms, people pay less for their connectivity now than they ever did and get much more,” Marc Allera states.
Announcing plans to outlaw inflation-linked pricing, Ofcom said that 4 in 10 broadband customers in the UK were on contracts subject to inflation-linked price rises.
If you’re in the minimum contract term of your broadband package, unfortunately, there’s no way to swerve these price increases – you'll just have to pay the higher bills and try to renegotiate a better deal at the end of your contract.
Most minimum contract terms last between 12- or 24-months after you signed-up. After that, you’ll be able to renegotiate a new deal with the same provider or switch to another brand.
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Switching between different broadband suppliers remains the best way to lower your monthly bills. Moving between brands that rely on BT-owned Openreach infrastructure is simple, with the new provider handling all paperwork to end your existing contract.
But if you’re looking to move from an Openreach-fuelled supplier to a separate network, like Virgin Media, prepare for a headache after new rules from Ofcom were delayed.
