Save, make, understand money

Household Bills

Mid-contract telecoms price rises under attack

Emma Lunn
Written By:
Emma Lunn

Experts are calling for consumers to be allowed to ditch telecoms contracts where the price goes up mid-contract.

More than 19 million consumers will see their mobile bills rise mid-contract this spring, with inflation-busting increases potentially hitting 11%, according to Uswitch.

The price comparison site found that more than half (56%) of consumers aren’t aware their deal includes a mid-contract price rise, and two in five (39%) consider the practice unfair.

Uswitch is calling on providers to let customers leave their contract penalty-free when price hikes are excessive and says that Ofcom should tighten the rules.

Researchers calculated that a total of more than £900m a year is being added to the nation’s telecoms bills. The increases will add £39 a year to the average broadband bill and £28 a year to mobile costs.

While providers must permit customers to leave penalty-free in light of unexpected mid-contract price rises, the majority of increases this spring will not be covered, as most contracts contain a rule allowing inflation-based price changes.

BT, for example, recently announced the prices of some broadband packages will rise by 9.3%.

Uswitch found that millions of Brits are sleepwalking into these price rises due to a lack of understanding about inflation and what it will mean for them when they take out a deal.

Only one in 100 consumers questioned could give the current 7.5% rate for the Retail Price Index (RPI), the inflationary measure O2 uses to calculate its mid-contract rise. The provider plans to add 3.9% to January’s RPI figure, which if unchanged, will mean an increase of 11.4%.

Less than one in 10 (9%) consumers can accurately cite the latest Consumer Price Index (CPI) inflation rate of 5.4%, which BT has used to calculate its planned broadband price increase of 9.3% — more than double last year’s figure of 4.5%.

Overall, 95% of Brits believe that the inflation rate for the RPI is lower than it actually is, with 70% underestimating the CPI rate. More than half of consumers (56%) are unaware these mid-contract increases exist.

The research also found that two in five (39%) people feel the mid-contract rises are unfair, with one in 10 (10%) saying they would not have taken out their current deal had they known the provider was going to increase their bill.

With BT, Virgin Media O2, Vodafone, and Three UK all due to increase their tariffs in April, one in six people (16%) said these additional bill increases would put them in a difficult financial position.

In light of these unprecedented mid-contract price rises, Uswitch is calling for telecoms providers to let customers walk away penalty-free if they find the increases unaffordable, and for industry regulator Ofcom to put an end to inflation-linked price increases.

Ernest Doku, telecoms expert at Uswitch.com, said: “With inflation at its highest level in 20 years, many mobile and broadband consumers will have never experienced price rises like these before.

“Worryingly, more than half of people do not know these mid-contract rises are on their way and many more are unaware of how they are calculated. With most of the main providers planning increases there is nowhere to hide, and consumers are currently unable to escape mid-contract rises that are written into their contracts without paying a penalty charge.

“Ofcom should be tightening its rules regarding mid-contract increases being linked to the now rising inflation, so that all subscription pricing is spelt out in pounds and pence. Broadband and mobile users cannot be expected to forecast future inflation rates when they take out their contracts.

“In the meantime, at a time where the cost of living is under real pressure for households, providers should let consumers walk away penalty-free from these excessive, unexpected hikes.”