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Price rises for 13 million mobile and broadband customers next week

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Written by: Emma Lunn
25/03/2021
Millions of telecoms customers will be hit by inflation-busting 4.5% mid-contract price rises next week – but accountholders will be penalised if they switch contracts.

Uswitch says the mid-contract price rises will cost consumers an extra £11m a month, but none of them will be able to walk away from these increases without paying a penalty.

Ofcom rules say that customers must be given one month’s notice of any rise in the monthly fee, and allowed to exit the contract without penalty. However, telecoms companies use a loophole in this rule by writing yearly increases into contracts and communicating it to customers when they sign up.

BT, EE, Three and Vodafone now increase their prices every year for most customers by the rate of inflation (CPI) plus 3.9%. Others, such as O2, increase prices by the rate of inflation (RPI).

Since this increase is written in their contracts, more than two fifths of mobile (43%) and almost one in 10 (9%) broadband customers are unable to leave penalty-free.

Inflation is currently low, with the December figure (CPI) used to calculate most of the spring price rises standing at 0.6%. However, if inflation rose to 3% — as it did as recently as 2018 — it would mean bills increasing by a massive 6.9%, equal to £16 extra a year for someone on a £20-a-month contract.

Uswitch.com experts have questioned the need for mid-contract price rises, as there are none in the fixed tariffs offered by the energy and insurance markets.

And while customers once had a choice to switch to providers that didn’t impose such increases, in recent years the main players in the market have all brought in similar policies.

The price comparison site is calling for the industry watchdog Ofcom to act to give consumers the option of exiting their contract without penalty and avoid any price rises, establishing the principle that a fixed length contract comes with a fixed price.

Richard Neudegg, head of regulation at Uswitch.com, said: “Millions of mobile phone and broadband customers are being hit by mid-contract price rises of 4.5% at a time when inflation is below 1%.

“Ofcom’s rules were supposed to allow consumers to leave their deal penalty-free if their bills go up, but providers have got around this by writing these increases into customers’ deals.

“Given the majority of telecoms providers are now using this tactic to prevent their customers from freely walking away from their contracts when prices go up, consumers have little choice but to accept this practice, taking a gamble on where future inflation rates will land. Now is the moment the regulator needs to step in and stamp out this loophole.”

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