Mobile and broadband price rises to be investigated

Many customers are facing sudden big rises in what they are paying for their mobile phone and broadband contracts, under a system the regulator says is "unclear and unpredictable".

Millions of customers are facing bill increases of as much as 14% in April, linked to the high rate of inflation.

Ofcom said it was concerned at the degree of uncertainty that customers face as a result.

So it is launching an investigation into mid-contract price hikes.

Companies often set out in contracts that monthly charges will go up in line with general price rises across the economy, as measured by the official inflation figures.

But dramatic rises in inflation over the course of the last year mean customers face much larger price jumps than they have seen in previous years.

BT, for example, which owns phone service provider EE, raises prices by inflation plus 3.9%, which will mean bills rising by 14.4% at the end of the financial year in March. Other firms will impose similar increases.

Firms say they need to increase prices to cope with rising costs, especially for energy, and to invest in new infrastructure to meet customers' growing demand for data.

BT said it had followed Ofcom's previous guidance on how to ensure price changes were clear for customers.

"While price rises are never welcome, we do feel this year's increase, of around £1 per week for the average customer receiving the rise, reflects incredible value given the cost increases we're facing, the considerable investments we're making, and ultimately the additional data that's being consumed month on month by our customers," a BT spokesperson said.

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.

Ofcom would look at whether "tougher protections" were needed, she said.

Some providers use a measure of inflation known as the Consumer Prices Index (CPI), while others use the Retail Prices Index (RPI).

Both those measures of the rate of rising prices are around the highest they have been for 40 years, despite a slight easing in inflation last month.

Mobile phone and broadband contracts, which are often for 18 months or more, usually also include requirements for anyone leaving them early to pay an exit fee.

Consumer groups have described these exit fees, which they say can reach £200, as "exorbitant".

Customers who are not tied to a contract or who have come to the end of a contract could "walk away" if prices went up, Ofcom said. But customers in mid-contract who are struggling to pay higher bills are left with no easy way out.

The regulator will examine whether firms are making it clear enough to customers when they sign up to a new phone or broadband deal how much prices could rise by over the course of the contract.

Ofcom says it will publish its report later this year, and make a decision on whether or not it will intervene further.

BT's spokesperson said: "We're surprised to see Ofcom introduce a review on this area, given the progress made since Ofcom's fairness commitments in 2019, where we moved away from unplanned and unannounced price changes, opting instead for a clear, single contracted rise, taking place in April each year."

Citizens Advice said Ofcom should go further and ban mid-contract price rises altogether.

"Ofcom is right to shine a light on this practice, but consumers need rapid action before inflation-busting price hikes kick in this April," said Matthew Upton, Citizens Advice director of policy.

He said Citizens Advice had found one in three people currently on contracts with rises linked to CPI have never heard of the inflation measure and called for more help in making pricing "crystal clear" for customers.