Broadband and phone companies face Ofcom probe over inflation-linked price rises
Ofcom is launching a probe into inflation-linked price rises on phone and broadband contracts.
The broadcasting watchdog is looking into whether mid-contract prices give customers enough certainty about what they can expect to pay.
Telecom companies are allowed to increase prices in line with inflation, plus roughly 4% extra on top of this, with many providers hiking costs by up to 14.4% this year under this rule.
The rate of Consumer Prices Index (CPI) inflation for December or Retail Price Index (RPI) for January are normally used to decide price rises.
Announcing its investigation today, Ofcom said “the unpredictability of inflation rates” means customers can struggle to know how much their bills will rise by.
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Research conducted by the regulator found a third of mobile and broadband customers don't know whether their provider can increase their price.
Of these customers, around half don't know how this would be calculated - meaning they're unable to plan for any potential increases.
Nearly half of all customers don't know what CPI and RPI measure - and for the ones that do, it is still impossible to predict how rates will rise and fall over time.
Telecom providers are required to set out future price rises in contracts before customers sign up. Some give customers 30 days’ notice and the right to exit penalty-free.
Cristina Luna-Esteban, Ofcom’s Director of Telecoms Consumer Protection, said: “Customers need certainty and clarity about what they will pay over the course of their contract.
“But inflation-linked price rises can be unclear and unpredictable. So we’re concerned that providers are making it difficult for customers to know what to expect.
“We’re taking a thorough look at these types of contract terms, to understand fully the extent to which customers truly know what they’re signing up to, and whether tougher protections are needed.”
Matthew Upton, Director of Policy at Citizens Advice, said: “Ofcom is right to shine a light on this practice, but consumers need rapid action before inflation-busting price hikes kick in this April.
“As we all pull together in a cost-of-living crisis, companies should do everything in their power to help consumers. That means making pricing crystal clear.“
It comes after many major broadband and phone providers confirmed they would hike bills by up to 14.4% this spring.
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You can see a full list of broadband and phone price rises here.
How to cut the cost of your broadband and mobile bill
If your mobile or broadband bill is about to get more expensive, you might be able to cut costs.
If you're out of contract, you're free to leave and go elsewhere - or maybe you want to haggle down your current provider.
There is also no harm in trying to haggle if you're still in contract.
The first thing you should do, is compare prices elsewhere to see what other deals are available.
You'll normally find SIM-only plans are the cheapest.
You can compare prices by using comparison websites such as MoneySupermarket and Uswitch.
Take a look at how many minutes, texts and how much data you currently use, so you can find similar plans that suit your needs.
You may find you're actually paying too much right now for allowances that you're not using.
When haggling, explain the better deals you've seen elsewhere then ask if the company can match or beat that price.
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