Original article ISPreview UK:Read More
The Government has clarified that it has “no plans to ban in-contract price rises” for UK consumers taking broadband, mobile and phone services, which makes their recent push to have Ofcom’s CEO, Dame Melanie Dawes, “look at in-contract price rises again“ seem increasingly unlikely to result in any big changes.
At the start of 2025 Ofcom began requiring telecoms providers to adopt a new approach to mid-contract price hikes, which did away with the old and confusing percentage and inflation-based model – replacing it with one that must now set out such price rises “clearly and up-front, in pounds and pence, when a customer signs up” (here). This made annual price hikes clearer and more transparent, but also resulted in many users being hit by even bigger price hikes – often disproportionately hitting those on the cheapest plans with the biggest hikes.
In response, many providers later followed BT’s lead by, for example, setting out a new pricing policy that would increase the monthly broadband price that customers pay by a flat £3 extra – effective from March or April each year (the level of increase varies a bit between providers). But inflation has remained higher than originally anticipated and, partly as a result of that, BT recently announced that they would increase their annual hikes by an extra pound to £4.
Other providers have since started to follow this practice, but what really caught attention was O2’s decision to go a step further by applying this to existing customers too (i.e. those who had signed-up via the previous policy were forced to accept the new one). In fairness, O2 did allow customers impacted by this to exit their contract penalty free, which Ofcom acknowledged when expressing their own “disappointment” at the change (here).
Fast-forward a public outcry or two and the Government’s Secretary of State for Science, Innovation and Technology, Liz Kendall MP, initially responded to this by appearing to direct the regulator to take a firmer line (here). For example, Kendall suggested Ofcom at least consider the possibility of adopting a “similar regime to those such as insurance, where new and existing customers need to be offered the same deal“, although we feel an outright ban on mid-contract price hikes would be a better approach.
The UK Government’s Chancellor, Rachel Reeves, then waded in (here) by calling on telecoms providers to “reinforce” their commitment to “treating customers fairly” by, among other things, confirming that “customers under contract will not face price rises beyond those they signed up for“. But this statement did cause some confusion, due to how it could be interpreted in two different ways.
On the one hand, it could be seen as the Chancellor making a call for mid-contract price hikes to be banned, which is how a few reports did interpret it. But on the other hand, the reference to price rises “beyond those they signed up for” could be seen as merely objecting to O2’s specific approach (i.e. opposing the forced application of a new price hike policy to existing customers, but not specifically opposing mid-contract hikes).
Government Makes it Clear
The issue came up for debate again yesterday, this time in the Lords Chamber in the Palace of Westminster (here), where the government were asked, by Lord Sikka, about “what steps they are taking to ensure price increases by mobile phone and broadband companies are fair“. The response came from the Parliamentary Under-Secretary of State for Business and Technology, Baroness Lloyd of Effra.
Baroness Lloyd of Effra (Government) said:
“My noble friend is right to highlight the importance of the ability to have the right contract and of giving consumers the information they need. We have no plans to ban in-contract price rises, but consumers have the right to leave, penalty-free, for 30 days from when unexpected price rises are announced by a provider.
The Chancellor and Secretary of State asked Ofcom to review the suitability of the current 30-day notice period, to ensure that it can be enacted by consumers who experience unexpected and unannounced mid-contract price rises.”
In short, it now seems increasingly unlikely that the government will push Ofcom to make any big changes against telecoms providers around the issue of mid-contract price hikes, which means we may well see other providers taking O2’s approach in the future. Unless, of course, Ofcom’s looming review of the matter does in fact come up with some constructively useful changes, but we won’t hold our breath for that one.
At the very least it would be good to see Ofcom’s review address the unfairness of how mid-contract price hikes are currently being applied (e.g. applying the same flat c.£2-4 monthly increase to those who pay just c.£20 a month and those who pay c.£100 – disproportionately targeting those least able to afford it), which in our view is one of the biggest issues.
However, it is still important to recognise that network operators often do still have to increase prices due to costs rising in other areas, such as for service provision, regulation, energy and the need to invest in new network upgrades etc. At the same time, the level of inflation has remained much higher than it was previously forecast to be, which changes the risk and cost assessment that each provider has to make on their pricing policies.
Adding to the feeling of the government being tone-deaf on the issue, one of the government’s recent letters even called on telecoms operators to “take proactive steps to move legacy customers onto the pounds and pence approach for price communications“. This is despite what we’ve just said above about the reality that, for some consumers, that policy will actually be resulting in lower mid-contract hikes than the new one.
On the flip side, many smaller providers are still able to figure all this into fixed price contracts that don’t apply mid-contract hikes, and so it’s not beyond the bounds of realism for the biggest providers to do the same. But until the government and Ofcom recognise that, then big retail providers will continue to get away with bad practice.
On the bright side, switching between telecoms providers has been made significantly quicker and easier in recent years, thanks to systems like One Touch Switching (OTS) on broadband + landline phone and Text-to-Switch (Auto-Switch) on mobile. Consumers can often vote with their feet if they choose, but many remain wary of doing so.