Ofcom confirms ban on unpredictable broadband and mobile mid-contract price rises after Which? campaign

Update - 19 July 2024. Ofcom has confirmed that it will ban mobile and broadband providers from using price rises tied to inflation, and introduce new rules that will force companies to detail price rises clearly in pounds and pence. This will afford telecoms customers greater clarity over the price they pay throughout a contract, and allow them to compare deals more easily. 

The new rules and guidance will apply to new contracts from 17 January 2025.

Rocio Concha, Which? Director of Policy and Advocacy, said: 'Ofcom confirming a ban on unfair and unpredictable mid-contract price hikes is a huge win for consumers. Which? has led the campaign to protect millions of households from being blindsided by telecoms price rises and give them certainty about the cost of these essential services.

'With Ofcom calling time on these unfair price hikes, providers must stop this practice immediately. Ofcom now needs to make sure that future mid-contract price rises are set competitively.

'It’s disappointing that ‘prices may vary’ terms have not been banned. The regulator must be prepared to intervene if these ad hoc increases are used as a back door for providers to impose unpredictable price increases on customers.'

Original story - 23 December 2023. Broadband and mobile phone providers will have to tell customers exactly how much any future price increases will cost them at the point of signing up, after the telecoms regulator, Ofcom, announced it is planning to ban mid-contract price rises that are linked to inflation.

Ofcom’s review of the pricing practice concluded that inflation-linked mid-contract price rise terms can cause substantial consumer harm by making it more complicated to choose a broadband or mobile deal, limiting consumer engagement in the market and reducing competition in the industry.

The regulator’s finding comes after a Which? campaign called for unpredictable mid-contract price rises to be banned, and for providers to voluntarily end the practice. Our research has shown that the pricing terms can unfairly penalise customers, who can be charged substantial amounts more than they signed up to. These rises make it almost impossible for people to predict how much their broadband or mobile contract will cost and dampen price competition in the telecoms market.

The Right to Connect: join our campaign to end unpredictable mid-contract price rises for broadband and mobile customers – sign our petition today

What Ofcom said about mid-contract price rises

Back in February, Ofcom said it would review whether inflation-based mid-contract price rises give broadband and mobile phone customers enough certainty about how much their deal will cost. Its aim was to explore whether intervention was required to give customers greater transparency and clarity about how much they will pay when they take out a contract. 

It also published preliminary research showing that a third of customers aren't clear on whether their price is likely to rise, and more than half do not know what CPI (Consumer Price Index) and RPI (Retail Price Index) measure. 

Alongside today’s announcement, Ofcom published a report outlining its concerns around mid-contract price rises: 

• Choosing a deal - It’s essential for consumers to be able to shop around with confidence. Inflation-linked mid-contract price rises have become more widespread and undermine customers’ understanding of what they will pay.
• The number of customers affected - As of April this year, around 40% of broadband customers and more than 50% of mobile customers were on contracts subject to inflation-linked mid-contract price rises. However, Ofcom expects these figures to grow over the next year.
• Price transparency - Ofcom research showed that even customers who do consider future inflation-linked price rises when choosing a new contract were often unable to estimate what the impact might be on the amount they pay. This is supported by our own research showing that only one in 20 customers were capable of estimating the impact an inflation-linked mid-contract price rise could have on their monthly bill.

In its report, Ofcom cited concerns that unpredictable mid-contract price rises limit consumer engagement and reduce effective competition in the broadband and mobile markets. It noted that these price increases push the burden of financial uncertainty from inflation onto consumers at a time when households are already struggling to manage costs.

Discover the best and worst mobile networks to see why opting for a smaller provider could net you savings, and a better service.

New broadband and mobile pricing rules proposed

Under Ofcom’s proposals, inflation-linked mid-contract price rises would be banned. Providers would also be prevented from including percentage-based price rise terms in all new contracts.

If providers wish to increase the amount customers pay over the course of their contract without also giving customers the right to exit, they would be forced to set this out prominently in pounds and pence, at the point of sale. Providers must also clearly outline when any changes in price would occur.

These new rules are just about price rises that are baked into your contract. It would still be possible for providers to announce impromptu price rises, but they would have to offer affected customers the right to switch away without charge for a 30 day window after the announcement. This is the current model used by Sky (and was previously used by the likes of BT and Virgin Media before they moved to inflation-linked price rises).

Ofcom has opened a consultation on its plans which will remain open until mid-February 2024. Its final decision on the unpredictable mid-contract price rise ban and its new pricing rules will be published in spring 2024, with the rules coming into effect four months later.

Find out everything you need to know about changing broadband deals in our step-by-step guide on how to switch broadband provider.

What's the issue with mid-contract prise rises?

Mid-contract price rises are usually based around the Consumer Price Index (CPI) or the Retail Price Index (RPI), with an additional percentage tacked on. Most of the UK’s largest providers have introduced them - the list includes BT and EE, Virgin Media and O2, TalkTalk, Three and Vodafone.

These price rises are baked into consumer contracts, so customers face a lose-lose choice between accepting an exorbitant price hike or paying a punitive exit fee. This year, inflation meant that some customers of major telecoms providers saw price increases of nearly 18%. 

The issue isn’t only the size of the increase though, there’s also a lack of clarity for customers shopping for a new deal. Because they are based on future inflation rates, consumers are unable to tell the total cost of their contract when they sign up.

Only a handful of the UK's larger telecoms providers, such as Hyperoptic, Utility Warehouse and Zen Internet, promise to keep your price the same for the full duration of your contract.

Why Which? has called for mid-contract price rises to be banned

We believe it is unfair - and in some cases, potentially unlawful - for consumers to be signed up to deals that do not give them certainty about how much they can expect to pay over the course of their contract, especially given exit fees can be punitive. That’s why our campaign, The Right to Connect, has called for clearer and fairer pricing for telecoms customers and an end to unpredictable mid-contract price hikes. 

Rocio Concha, Which? Director of Policy and Advocacy, said: 'Ofcom proposing to ban unfair and unpredictable mid-contract price rises is a huge win for consumers. Which? has spearheaded the campaign to protect millions of households from being blindsided by these huge price hikes by telecoms firms. 

"It's positive that the regulator plans to move quickly to consult and implement these proposals. With Ofcom calling time on these unfair price hikes, providers must stop this practice immediately.'

While we support the outcome of this review from Ofcom, alone it won’t be enough to stop the price increases providers have planned for spring 2024. We’ll continue to campaign for telecoms providers to do the right thing by stopping this practice voluntarily, ensuring that customers are not impacted by unfair price rises next April.

We've estimated that telecoms firms could generate nearly £500 million solely from next year's price increases. And while the impact of next year's price increases depend on inflation rates in January and February, our research has shown that mid-contract price rises could mean some broadband customers pay £150 extra for their deal when compared to the amount they signed up for. Meanwhile some mobile customers could pay as much as £120 more than they originally signed up for, thanks to two years of high inflation.

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