The Right to Connect: Ensuring the price you see is the price you pay

Summary

It is essential that consumers are able to access affordable, good quality connectivity.

When choosing their connectivity package, consumers need to have a choice of options available to them, and clear and certain information. This will help them to successfully compare packages and ensure that their choices meet their needs. Price is a key aspect of this decision making process for consumers. Some consumers even prioritise their connectivity expenditure above other household bills [1].

The pricing practices employed by most mobile and broadband providers fail to enable consumers to make informed decisions based on the price of a contract. Mid-contract (or ‘in-contract’) price rises mean that consumers face an increase in prices on an annual basis (normally in April). These increases are tied to either the Consumer Price Index (CPI) or Retail Price Index (RPI) rate of inflation. This is a figure which is usually uncertain at the point of signing up to the contract [2]. This means consumers do not know the level of the price increase when they initially sign up and cannot calculate the total cost of the contract. Providers typically add a further rise of 3.9% which they state is to cover their own increased costs and investments in infrastructure. When these price rises happen, consumers do not have the right to exit without penalty.

Which? first campaigned on the issue of price rises during fixed term mobile phone contracts in 2012. This resulted in Ofcom taking action which aimed to provide transparency for consumers on these price increases. Since then, providers have adjusted their approach, with these inflation-linked price rises creeping into customer contracts for both broadband and mobile since 2020. In the high inflationary environment of 2022/23, this practice came into sharp focus. Consumers faced price rises of up to 17% on their telecoms bills, with no ability to avoid the increase [3].

While the cost of living crisis has brought this issue to the top of the agenda, even in periods of low inflation, unpredictable mid-contract price rises are harmful for consumers [4]. They obfuscate prices, making it impossible for consumers to make an informed choice, and undermine price competition - meaning that consumers end up paying more overall. The harms may be more pronounced for certain consumer groups, particularly those who have low levels of understanding about inflation and the impact this could have on their future bills. Sharp and unexpected price rises can strain household budgets and cause affordability issues. 

We're demanding big broadband and mobile phone providers drop hikes buried in the terms and conditions. Agree? Sign the petition

Consumers prefer, and should have, pricing certainty. They should know at the outset not only the price that they will pay at the beginning of their contract, but also the precise level of any price increase during the contract. Inflation-linked mid-contract price rises make this impossible. Unusually for consumer markets, these contract terms shift the burden of managing inflation risk away from communications providers and onto their customers.

Which? welcomed Ofcom’s announcement earlier this year that it will publish a review into inflation-linked mid-contract price rises in December 2023. It is critical that Ofcom’s approach addresses the consumer harms arising from these unpredictable price rises and provides a long term solution.

In considering the consumer harms and the potential policy solutions, Which? has developed a set of recommendations. These aim to address the unfair burden placed on consumers and ensure that they have pricing certainty for this essential service. Ofcom must ensure that consumers can rely on price as part of their decision making and accurately compare contract prices. This will help to ensure that consumers can fully benefit from choice and greater competition in the market. 

The importance of connectivity

Good quality connectivity is now essential for many everyday tasks - from schooling and working, to banking and shopping. 

Consumers who are online have a greater choice of products and services available to them and can often take advantage of exclusive and discounted deals. Connectivity has become so essential for consumers that in recent times, some have reduced their spending on essential items such as food or clothes to be able to pay for their telecoms service [6]. The government has also embraced the move to digital with its digital by default strategy [7].

This digital dependence means it is essential that consumers are able to access affordable, good quality connections. Those who are unable to get the right package for their needs will experience financial and time harms - for example increased costs or having to use traditional offline routes. Consumers need to have a choice of options available to them, with clear and definitive information. Each household must be able to effectively compare telecoms packages and be confident that the packages they choose meet their needs.

Current mid-contract price rise practices

The majority of the UK’s communications providers (broadband and mobile) increase the prices charged to both in-contract and out-of-contract customers on an annual basis (normally in April). 

Prior to 2020, broadband contracts did not usually have price rises specified in the contract, but price increases still occurred on an ad hoc basis. Some mobile services had annual mid-contract price rises that were linked to inflation measures (but increases did not exceed inflation) [8].

Since late 2020, providers have increasingly moved to inflation-linked mid-contract price rises which are set out in the customer’s contract terms and conditions. These increases are usually in the form of CPI/RPI plus x% (which is almost universally 3.9%) [9]. Most providers apply these increases every April. Consumers do not know the level of the price increase when they initially sign their contract and do not have the right to exit without penalty when the price increases. The impact of this can be compounded if contracts are lengthy [10].

Another model of mid-contract price rises used by some providers (Sky and previously Virgin Media [11]) is to apply discretionary price increases. Here, the customer’s contract includes a term to the effect that the provider may increase the subscription price [12]. In these situations, the consumer is able to leave the contract without penalty when the price increases. Some providers also retain the right to raise prices at any time within contract terms and conditions [13].

Communications providers state that mid-contract price increases are necessary to help cover their own rising costs and help fund investment in infrastructure. A minority of smaller providers do not apply any price increase during the customer’s minimum contract term. This is used as a point of competitive difference. 

Previous regulatory interventions

Ofcom made interventions in both 2013 and 2022 to make pricing more transparent for consumers. 

In 2013, following a number of consumer complaints and evidence from Which? [14], Ofcom published a consultation looking at whether consumers needed additional protection from price rises in fixed term telecoms contracts. Ofcom’s approach was focused on the need for transparency. It decided to issue new guidance in relation to price rises during a fixed contract term with a view that the information would enable consumers to make informed decisions, and that they could “avoid the effect of terms and practices that surprise and impose on them unfair burdens and risks” [15].

The guidance set out that if the relevant price terms are “sufficiently prominent and transparent that the subscriber can properly be said to have agreed on an informed basis, at the point of sale, to the relevant prices”, the customer does not have a right to exit without penalty as the prices are ‘agreed’. 

Separately, Ofcom deemed that discretionary price increases [16] are always materially detrimental to the consumer. When this happens, consumers must be given 30 days notice of the price increase and are allowed to exit the contract without penalty.

In 2022, Ofcom introduced further transparency rules as part of implementing the European Electronic Communications Code (EECC) [17]. This requires providers to give customers a contract summary [18] alongside more detailed contract information, before they are bound by the contract [19]. This must include pricing information - if the price increases by inflation, an example of what the customer’s price would be once the inflation increase has been applied must be included. Ofcom considered this important for consumers so that the price is clear and comprehensible, and that they have an indication of how the relevant inflation index might affect the price they will pay. 

Recognising the potential ongoing consumer harm, in 2023, Ofcom announced new work on in-contract price rises including a review looking at inflation-linked in-contract price rises.

It will consider whether this practice “is sufficiently clear, comprehensible and certain for consumers to make informed choices” [20]. Ofcom has found that nearly a third of in-contract customers do not know whether their provider can increase their monthly payment during their minimum contract period [21]. Alongside its review, Ofcom launched an enforcement programme looking at communication providers’ compliance with previous rules on the prominence and transparency of price rise terms [22].

Further to this, the Committee of Advertising Practice (CAP), responsible for writing the advertising codes enforced by the Advertising Standards Authority (ASA), has looked at mid-contract price rises through an advertising lens. It issued new guidance in 2023 requiring these price rises to be more prominently stated in telecoms advertising across media [23]. This guidance takes effect in December 2023 [24].

The Competition and Markets Authority (CMA) has suggested that Ofcom and CAP reconsider their approach, because in their current form, variable pricing practices in fixed term telecoms contracts risk being unfair under the Consumer Rights Act 2015 and/or the Consumer Protection from Unfair Trading Regulations 2008. Addressing the proposals by the CAP aimed to further improve the transparency of inflation-linked price terms, the CMA said:

“Even if it could be made grammatically clear how the go-to price will be calculated… it would still be impossible for the average consumer to know what the price will be, and therefore we consider it fails the transparency test… [25]”

We believe this is fundamentally why Ofcom’s past remedies have failed to address the consumer harm resulting from mid-contract price rises. Our research, which is discussed later in this report, demonstrates that price rises being linked to unknown variables, like inflation, means that consumers do not understand the full cost of the contract because they cannot calculate their future price.

In August 2023, Which? asked Ofcom to investigate Virgin Media after our legal review highlighted that their terms and conditions contained the most egregious example of unacceptable price variation practices. However, Virgin Media is not the only provider that may be relying on questionable contract terms. We have urged the regulator to systematically assess the terms and conditions of all telecoms providers to ensure that they are complying with consumer protection law on unfair contract terms and unfair trading practices [26]. Issues such as Early Termination Charges (ETCs) and length of contracts are likely to be relevant to those assessments.

The consumer harm

Consumers cannot understand the price they will pay

Ofcom recognises that the core subscription price for a telecoms service is likely to be one of the most important aspects of the contract when consumers are making decisions about which service to take [27]. Consumers should be able to rely on pricing information at the point of comparing, and signing up to a contract. Without this they are unable to properly compare deals, make an informed decision, or have a clear understanding of what they can expect to pay throughout their contract. 

Despite this, Ofcom’s current remedies place the onus on the consumer to read, and comprehend their terms and conditions and contract information to understand how their prices can change. Then, in order to predict the price they will pay in the future, consumers need to be able to:

• Understand inflation indices;
• Obtain an inflation estimate; and
• Make a calculation based on their contract terms.

Which?’s research demonstrates that just 1 in 20 consumers (5.2%) are able to successfully complete this complicated set of steps [28].

 Figure 1: Only 5.2% of people can estimate their future contract price

Only half (51%) of broadband customers know that CPI and RPI measure the rate of inflation. Among those that did identify these as inflation indices, less than a quarter (23%) were then able to provide a reasonable forecast for CPI inflation in January 2024 [30]. When given a forecast for CPI and asked to calculate their new monthly price, just a quarter (25%) of respondents answered correctly.

Worryingly, we found some consumer groups are disproportionately more likely to find inflation-linked price rises difficult to understand. People with a disability, with lower levels of educational attainment and with lower incomes are all less likely to know what CPI and RPI are,  be able to forecast future rates of inflation and be able to calculate a price increase. Taken cumulatively, this results in large differences in the success rates of different groups in answering all three questions. Those with higher household incomes (greater than £48,000 per annum) were more than twice as likely to correctly answer all three questions than those with lower incomes, and those with a higher education were about one and half times as likely to be able to do it as those without. 

Attaining pricing certainty is made all the more challenging for consumers given that contracts are typically 18 or 24 months long. This forces consumers to predict multiple future price rises once they are aware of their contract terms. 

Our research demonstrates that no matter how clearly information is presented about inflation-linked price rises, it will be insufficient to ensure all consumers understand the full costs of the contract. 

The harm is further exacerbated by the fact that inflation-linked price increases, which usually happens each April, invariably apply to all customers, even those who have just recently taken out a new contract [31]. This can lead to a situation where a customer may have compared prices and made what they thought was an optimal choice, only to find that their price goes up within weeks of taking out a contract. These consumers suffer harm, as they will have spent time researching the best option for their needs, only to end up in a situation where they are forced to pay more than they had expected to.

Limited choice and barriers to competition

This structural price uncertainty for consumers has wider effects on the market. Without pricing certainty, the headline price of telecoms services is less informative for consumers, dampening price competition between providers. Consumers are unable to effectively compare the offers of different firms, which may include different levels of price increases, or not include one at all. This means that whilst companies retain incentives to offer lower up-front prices, there is less incentive to lower the actual total cost of the contract. 

The harm to consumers is increased because in the vast majority of cases, when prices do rise, it is unavoidable [32]. Those facing inflation-linked or otherwise unpredictable price rises that are written into terms and conditions, can only exit by paying substantial Early Termination Charges (ETCs). 

The presence of these exit fees means that providers continue to lack the competitive pressure to reduce costs or remove these terms as consumers are forced to accept them. As a result, consumers are then unable to take advantage of other competitive offers available to them in the market at the time the price increases.

Even if consumers could leave their contract without penalty, they have limited options in terms of avoiding future increases. Which? notes that most providers implementing these inflation-linked price increases do so with an additional mark-up of up to 3.9%, so even if switching were possible, it is likely most of the offers available will also include uncertain prices.

The similarity in the level that these price rises are set across the industry also suggests these increases are not set competitively. Otherwise, we might expect to see providers undercutting each other on their price increases.

Consumers prefer certainty

The importance of price certainty is confirmed by our recent research, which rigorously tested consumers’ preferences when it comes to pricing. The results unequivocally show that people have a preference for certainty in the price they pay for telecoms contracts [33]. We found that consumers would prefer a deal with price certainty, even over a deal with price variation terms that initially began at a lower headline price [34]. 

Taken together, Which?’s evidence shows why Ofcom’s past transparency remedies have failed to address the consumer harm resulting from mid-contract price rises. Despite multiple regulatory interventions, consumers facing inflation-linked mid-contract price rises remain unable to calculate their future monthly bills [35]. This has knock on effects for the whole telecoms market, dampening price competition and limiting consumer choice. Yet, providers are able to persist with these practices, despite consumers overwhelmingly believing they are unfair [36]. Our research proves there is a strong consumer preference for price certainty, which the market is failing to provide.

Which?’s recommendations

1. Price rises linked to unpredictable figures must be banned within the terms of a contract 

Which? recommends that Ofcom should ban providers from linking mid-contract price increases to unpredictable variables. This includes linking price variation terms to an inflation index (be that CPI or RPI). The current practice of inflation-linked mid-contract prices is causing consumers financial harm that they cannot plan for or avoid. 

This does not mean that providers should be prevented from varying prices within the minimum term of a contract, or be required to fix prices for its duration. Instead, providers must eliminate any variable or unpredictable consideration that does not make the monthly and whole contract cost known to the consumer when they take out a contract.  Consumers should not be required to make predictions or spend any time researching or calculating how the price they pay will change during their minimum contract period. This approach would enable providers to make inflation-based price increases, but they would have to be calculated by the provider and integrated into the price of the contract from the outset. This would enable consumers to know exactly what they are going to pay for the contract when they sign up.  

Providers may choose to offer contracts with a single price for the duration of the contract, or maintain variations as long as they are absolutely clear what the increase will be. These options may result in a wider choice of contracts to better suit consumers’ needs. 

2. Consumers should have certainty about their monthly price and whole contract cost at the point of comparison and signing up

Alongside a ban on unpredictable price variation terms, Which? believes new rules are necessary to ensure consumers are given absolute price certainty by providers. These rules should ensure consumers can know, in pounds and pence, the monthly price they will pay at every stage of a telecoms contract, and the cost of the whole contract at the point of comparison. 

These rules would enable consumers to directly compare packages on price, even those with different tiered pricing levels. The whole contract cost would also enable comparison between contracts with tiered pricing and those with fixed pricing. Consumers need the ability to effectively compare connectivity packages to manage their personal household budget and needs. These rules would remove the current burden on consumers to make estimates and calculations, and enable them to use actual numbers to make an informed decision.

Providing a total price over the life of the contract is not dissimilar to information provided to consumers in other markets, such as insurance. It is also a metric which is already used on price comparison websites to help consumers compare offers. As a result, it may be less confusing for consumers than possible alternatives, such as providing an average monthly price alongside the actual monthly price.

3. Discretionary price rises must only be used by providers in extraordinary circumstances

A ban on unpredictable mid-contract price variation terms could result in providers moving to a model of discretionary price increases. This form of price rise was widespread prior to the introduction of inflation-linked mid-contract price rises. Currently, consumers must be given the right to exit the contract if they do not wish to accept a discretionary price increase but often face barriers to doing so. 

It is critical that providers do not revert to relying on discretionary price increases - these are also unpredictable and unclear for consumers. In addition, Which? believes that, in their current form, the terms that enable them can risk breaching consumer protection law.

Alongside banning price rises based on unpredictable figures within terms and conditions, Which? recommends that Ofcom revises its guidance on discretionary increases [37]. This should clarify that the only permissible reason for communication providers to apply an ‘ad hoc’ price increase is for changes imposed by law, like changes in VAT, or any other directly and specifically applicable taxation charge or regulatory levy.

This would ensure consumers have clear and predictable prices for their contract duration, by preventing providers from reverting to this harmful practice as a means to raise consumers’ prices mid-contract, while enabling firms to make pricing adjustments where there are extraordinary circumstances.

Risks and mitigations

Higher upfront prices

The most significant risk related to a ban on unpredictable price variation terms is that providers raise their headline prices to compensate for lost revenue. Even if mid-contract price rises are set in pounds and pence in advance, it is possible that this amount could be higher than inflation - particularly in periods of low inflation. Providers are likely to be risk averse, and seek to maintain revenues and ensure cost recovery. It may also prove to be an opportunity for providers to cynically increase margins and profits. 

If inflation were at target (2%), under the current inflation-linked model, prices would increase by around 6% each year. On an average priced broadband contract (£35.75pm) [38], this would amount to around an extra £2.15 per month. Providers who decide to fix their prices for the duration of a contract may use any ban on linking prices to unpredictable figures, such as inflation, to raise headline prices by more than this to hedge against higher than expected inflation or costs.

This risk is likely to be mitigated by competition. Consumers will be better able to identify the best offer for their circumstances so a previous barrier to competition will be removed. We anticipate this will intensify price competition and should further encourage innovation in consumer contracts, which should lead to greater choice, and lower prices. Consumers place significant value on certainty and prefer contracts with certainty, even over uncertain contracts that begin at a lower headline price [39]. This means that even if there were small increases to upfront prices in the short term, consumers would gain utility from price certainty.

Shorter contracts

A ban on unpredictable mid-contract price rises could lead to providers moving to shorter contract lengths as a way to manage fluctuations in their costs. The CMA has found that consumers generally prefer shorter contracts for their flexibility, and that this is particularly valued by those on lower incomes [40]. 

Ofcom already sets maximum contract lengths at 24 months, and requires providers to offer customers the choice of a short term contract that cannot be more than 12 months [41]. Currently, in the broadband market, shorter contracts are often not well advertised and tend to be more expensive than an equivalent contract of a longer duration [42]. There is a risk that if shorter contracts became more common, consumers could end up paying more for their contracts.

These risks should be mitigated by increased price competition. Having greater price certainty and clarity at the point of comparison may also make it easier for consumers to engage with the market and identify the best deal for them. 

Out-of-contract customers

A related risk to there being more short contracts on offer is that there is a higher proportion of consumers who are out-of-contract at any given point in time. Out-of-contract customers can take out a new contract with their existing provider, or switch to a new one. However, many consumers do not engage with their telecoms contract and suffer financial harm because of it. Out-of-contract customers tend to pay more than those who are in-contract [43].

This is partially because many providers will move customers from an ‘introductory offer’, to a more expensive ‘standard tariff’ at the end of their minimum contract term. Many providers then continue to increase this out-of-contract price on an annual basis, on the same price variation terms that affect in-contract customers.

More should be done to encourage out-of-contract customers to engage with the market, and protect them from protracted periods of paying more than they need to for their telecoms services. In the context of our recommendations, having greater price certainty and clarity about cost may help overcome some of the barriers consumers face to engaging with this market and better enable them to choose the right package for their needs. 

Early Termination Charges (ETCs)

In 2013, Which? supported Ofcom’s proposed remedy of allowing all consumers to exit without penalty for any increase in price [44]. 

After consultation, Ofcom backed down from this position, leaving the door open for consumers to be trapped when faced with inflation-linked price rises. In 2022, Which? called on providers to voluntarily allow consumers to leave penalty free at the point of price rises. Our view was that this would help consumers to mitigate the short term shock of 2023 inflationary pressures, and the unprecedented resulting increase in monthly telecoms bills. 

Which? does not believe that, on its own, extending consumers’ right to exit, beyond instances of discretionary price increases, is an adequate long term solution to the consumer harm created by inflation-linked price increases. While it does give consumers an opportunity for recourse when prices increase, it also requires consumers to take proactive action. 

It is well known that consumer engagement in these markets is low, which raises the question of how many consumers would take advantage of this opportunity to switch [45].  We also question whether the notice periods consumers are currently given are long enough to enable them to act on notifications of their rights. The prevalence of inflation-linked mid-contract price rises also limits the options for consumers if they do choose to switch. Like the transparency solutions already in place, this remedy would also fail to enable consumers to know exactly how much they will pay for their contract upfront, or enhance price competition.

Stepping back from the issue of unpredictable price rises, we remain concerned by the exorbitant Early Termination Charges (ETCs) faced by consumers in the telecoms market. These can act as a barrier to consumers switching to save on their telecoms bills, and the levels they are set at deserves in depth scrutiny from Ofcom. Our February 2023 analysis showed typical broadband customers with 12 months remaining on a contract could be forced to pay more than £200 to exit that contract, whilst typical SIM only mobile customers with one of the Big Four mobile operators could face exit fees of almost £300 [46].

Which? understands that ETCs play a role in enabling providers to mitigate customer ‘churn’. Keeping customers for the duration of their contract also allows for lower prices to be offered because providers can have a degree of certainty about future revenues. However, we believe the level of ETCs we have identified for typical customers is exorbitant, and disconnected from relevant factors like the cost of discontinuation. Ofcom should review this issue and take appropriate action to remedy this apparent imbalance.

Conclusions  

Unpredictable mid-contract price rises are harmful for consumers. 

They obfuscate prices and undermine price competition, which will lead to consumers paying more overall. They may also unfairly penalise consumers who have lower levels of understanding about inflation and the impact it could have on their future bills. Moreover, sharp and unexpected price rises can strain household budgets and cause affordability issues. 

More generally, consumers almost always prefer to have certainty over the price they pay for goods and services, but this is denied to them by inflation-linked mid-contract price rises. Unusually for consumer markets, these contract terms, used by the majority of telecoms providers,  shift the burden of managing inflation and cost risk away from providers and onto their customers.

Which? welcomed Ofcom’s decision to review this practice, and agree that “inflation-linked in-contract price rise terms may not give customers sufficient clarity or certainty about what they will pay…” [47]. Ofcom must use its review to address the consumer harms from unpredictable mid-contract price rises.  It must ban price rises linked to unpredictable figures and ensure that consumers know exactly what they will pay when they sign up for their contract. As part of this, it should set new rules to give consumers certainty about their monthly price and whole contract cost at the point of comparison and signing up. Ofcom should also prevent providers from reverting to discretionary price rises as a result of banning unpredictable price rises, as this would still leave consumers without clarity about how much they will pay over the duration of their telecoms contract. Which?’s recommendations allow providers to continue to cover their costs, and raise the revenue needed for continued critical network investment. 

Ofcom should also ensure that all consumers benefit from a reduction in harm as a result of a change in the rules around mid-contract price rises. There is a risk that some consumers will remain in contracts which include these terms for a significant period of time after any change takes place. Ofcom should consider how best to address this risk.

In addition, Ofcom must not ignore the related issue of exorbitant ETCs in these markets. It should review and take appropriate action to remedy the apparent imbalance Which? has identified.

Glossary of key terms

Mid-contract price rises (also ‘in-contract price rises’) 

Where the monthly core subscription price of a telecommunications service is raised during the consumer’s minimum contract period.

Minimum contract period (or ‘fixed term’ of the contract)

This is the minimum length of time a consumer must take the services that they sign up for. If the consumer cancels their services before then, they may have to pay early termination charges. (Source: Ofcom). 

Ofcom rules dictate that the minimum contract period for telecoms contracts cannot be longer than 24 months. Mobile and broadband minimum contract periods are typically 24, 18 or 12 months, or otherwise renew on a 30 day rolling basis.

Core subscription price

The monthly price consumers pay for their service during their minimum contract period, when no additional services are used. This differs from the non-subscription price(s): for services that fall outside of the relevant inclusive package or core subscription, and which are billed incrementally when such services are used by the customer. For example, for mobile customers they typically include charges incurred when they exceed their monthly inclusive allowance of services, and for premium rate services, making calls and sending texts internationally and roaming services. (Source: Ofcom)

Headline Price

The most prominently displayed or the advertised price. Likely to be the starting price for a telecoms service, which may be subject to rise if a price variation term is included in the terms and conditions.

Fixed prices

A contract includes a single price which is fixed for the entire term of the contract e.g. £20/month for 24 months. (Source: Ofcom)

Price variation terms

Price variation terms are written into some communication providers' contracts. They allow the provider to increase the core subscription price paid by a customer at different times throughout their contract. (Source: Ofcom)

Tiered prices

Where the contract specifies the consumer will pay different prices at different times, e.g. £10 a month for the first 12 months and £15 a month for the second 12 months. Or £10 a month for 12 months, then £10 plus a percentage increase (for example in line with inflation). (Source: Ofcom)

Inflation-linked mid-contract price rises

Price rises that are calculated through a formula that includes an inflation index, typically CPI or RPI. Currently, many providers add an additional percentage to this index. These are enabled by price variation terms written into consumers’ contracts, specifying when the price rise will take place and by what formula.

Discretionary mid-contract price rises (also ‘ad hoc’ price rises)

The consumer agrees to pay a core subscription price for the minimum contract period, but the provider reserves the right to increase the price at its discretion (Source: Ofcom). The contract includes a term to the effect that the provider may increase the subscription price, but they do not specify how or when this will happen. 

Consumer Price Index (CPI)

CPI is a measure of inflation - it compares the change in prices paid for consumer goods and services from one year to the next. CPI is designated an official National Statistic in the UK. 

Retail Price Index (RPI) 

RPI is another measure of inflation that also compares the change in prices paid for goods and services from one year to the next. However, the Office for National Statistics (ONS) has found it does not meet the standard for designation as a National Statistic. ONS discourages the use of RPI, saying it’s not a good measure of inflation and is likely to overstate it. It says any use of RPI over other indices (such as CPI) should be ‘closely scrutinised’.

Communications Providers (CPs)

A person who provides an electronic communications network or provides an electronic communications service, as defined in the Communications Act 2003 (Source: Ofcom). Generally, providers of mobile communications services, and fixed broadband services.

Early Termination Charges (ETCs) 

The charges imposed by communication providers when consumers on fixed term contracts terminate those contracts early (Source: Ofcom).

European Electronic Communications Code (EECC)

A European Union directive which was subsequently transposed, implemented and retained in UK law. It had many objectives, including new protections for customers (the ‘end-user rights provisions’).

Footnotes

[1] Ofcom (2023) Affordability of communications services  ↑

[2] The price rises which come into effect in April are usually based on the inflation figure announced in January of the same year. E.g. in April 2023, the CPI inflation figure used in mid-contract price rises was 10.5% - this was the figure announced in January 2023  ↑

[3] Which? notes that some financially vulnerable consumers are able to benefit from Social Tariffs. While take up and awareness of these remains low, they offer eligible customers pricing certainty as they are not subject to mid-contract price rises  ↑

[4] Which? (2023) Customer knowledge and understanding of mid-contract price rises  ↑

[5]  Ofcom must define what these extraordinary circumstances are. Ofcom should replicate the standard currently used around contractual modifications, so that discretionary rises are only permissible when directly imposed by law (for example, a change in the rate of VAT)  ↑

[6]  Ofcom (2023) Affordability of communications services  ↑

[7] Cabinet Office (2012) Government Digital Strategy  ↑

[8] Ofcom (2022) Pricing trends for communications services in the UK  ↑

[9] The CPI or RPI measure used in the April price increase is typically the figure published in January or February of that year respectively  ↑

[10] Ofcom rules set maximum contract lengths at 24 months  ↑

[11] Virgin Media O2 has now changed the Terms and Conditions for its broadband customers and from 2024 will apply an increase of RPI + 3.9% each year  ↑

[12] For an example of discretionary price rise terms, see Sky Broadband’s terms and conditions  ↑

[13] Which? (2023) Which? tackles unfair broadband price hikes by demanding Ofcom investigation of ‘unlawful’ Virgin Media contracts  ↑

[14] Which? (2012) The marketing of mobile phone ‘fixed’ term offers: a complaint to Ofcom  ↑

[15] Ofcom (2013), Price rises in fixed term contracts  ↑

[16] Discretionary increases are enabled where a customer’s contract includes a term to the effect that the provider may increase the subscription price, but where they don’t specify how or when this will happen  ↑

[17] Ofcom (2020) Statement: Fair treatment and easier switching for broadband and mobile customers  ↑

[18] Note that the contract summary is not prescriptive in relation to the pricing information that should be included about inflation-linked prices. Ofcom (2022) Annex 7: Guidance on contract information and summary  ↑

[19]  Ofcom (2022) New rules on short and simple contract details  ↑

[20] Ofcom (2023) Review of inflation-linked in-contract price rises - Terms of reference  ↑

[21] Ibid  ↑

[22] Ofcom (2022) Enforcement programme into in-contract price variation terms  ↑

[23]  It also states that once the inflation rate on which an advertiser bases their inflation-linked increase has been published, an advertisement will be likely to mislead if it does not include the total monthly price that the consumer will pay once the price rise is applied  ↑

[24]  ASA, CAP (2023) Guidance on the presentation of mid-contract price increases in telecoms ads  ↑

[25]  The CMA also raised balance of power concerns about this practice given that it appears in most cases a) that there is no benefit to the consumer under the contract terms, only to the provider, and b) that there is no possibility of prices falling under this approach, even when inflation is negative CMA (2022) CMA response to Committee of Advertising Practice ('CAP')  ↑

[26] Which? (2023) Which? asks Ofcom to investigate Virgin Media contracts over fears they could break the law  ↑

[27] Ofcom (2020) Statement: Fair treatment and easier switching for broadband and mobile customers  ↑

[28] Which? (2023) Customer knowledge and understanding of mid-contract price rises  ↑

[29] Ibid  ↑

[30]  Responses within two percentage points either way of the Bank of England’s forecast were acceptable. At the time of asking the forecast for CPI in January 2024 was 4.4%  ↑

[31] Ofcom (2023) Review of inflation-linked in-contract price rises - Terms of reference. Note that some consumers are exempted from price rises. Some providers exempt customers identified as financially vulnerable and those on social tariffs  ↑

[32] Note that out of contract customers could choose to re-contract or switch to avoid price rises. Although, there is limited choice of providers not applying mid-contract price rises  ↑

[33] Our research suggests that at an economy-wide scale, the value consumers place on price certainty for their broadband contracts alone is as much as £710 million, of which £514 million relates to inflation-linked mid-contract price rises, which are the most commonly used  ↑

[34] Which? (2023) The benefit of certainty: Valuing consumer preferences for fixed price broadband contracts  ↑

[35] Which? (2023) Customer knowledge and understanding of mid-contract price rises   ↑

[36] Which? (2023) The benefit of certainty: Valuing consumer preferences for fixed price broadband contracts  ↑

[37] Which? notes that Ofcom’s 2023 review is focused on inflation-linked in-contract price rises and that ad hoc or discretionary price rises are out of scope  ↑

[38] Based on the amounts paid by customers in a nationally representative December 2022/January 2023 survey of 3,897 people who had a contract for a home broadband service (including broadband and phone)  ↑

[39] Which? (2023) The benefit of certainty: Valuing consumer preferences for fixed price broadband contracts  ↑

[40]  CMA (2019) Consumer vulnerability: challenges and potential solutions  ↑

[41] Ofcom (2011) Changes to General Conditions and Universal Service Conditions  ↑

[42] For example, at the time of writing (September 2023), an equivalent 36mbps broadband deal from BT was initially £31.99 for a 24 month contract and initially £38.99 for a 12 month contract  ↑

[43] Ofcom (2021) Telecoms customers saving millions as Ofcom rules bed in  ↑

[44]  Which? (2013) Ofcom must protect consumers from ‘fixed’ mobile phone hikes  ↑

[45] Ofcom's Switching Tracker showed that in 2022, the switching rate for mobile customers was 15% and just 9% for broadband customers. Ofcom (2022) Switching Tracker 2022 data tables Which? (2019) Consumer Engagement with Broadband Market. Which? (2019) Consumer Engagement with Broadband Market  ↑

[46] Which? (2023) Broadband customers trapped by choice between huge mid-contract price hikes or exit fees of over £200, Which? Warns  ↑

[47] Ofcom (2023) Review of inflation-linked in-contract price rises  ↑

About

Which? is the UK’s consumer champion, here to make life simpler, fairer and safer for everyone. Our research gets to the heart of consumer issues, our advice is impartial, and our rigorous product tests lead to expert recommendations. We’re the independent consumer voice that works with politicians and lawmakers, investigates, holds businesses to account and makes change happen. As an organisation we’re not for profit and all for making consumers more powerful.

Citation

If citing this paper in your own work, our preferred citation is: Which? (2023), The Right to Connect: Ensuring the price you see is the price you pay.