The UK media regulator has launched a probe into whether telecoms companies are treating customers fairly as groups prepare to raise their rates by 14 per cent against a backdrop of rising living costs.
Since 2021, much of the fixed broadband and mobile market has increased its prices annually in April both for new customers and those already in contract.
Telecoms groups tend to base these rises on the previous year’s annualised rate of inflation, plus around 3.9 per cent.
The review comes after politicians and industry insiders raised the alarm over telecoms companies’ lack of transparency with customers about price increases.
According to official data, consumer price inflation was at 10.5 per cent in the year to December 2022, meaning most mobile and broadband tariffs are expected to rise by an average of 14.4 per cent.
Ofcom said it was “concerned about the degree of uncertainty consumers face about future price rises”, in part because of the unpredictability of inflation.
The regulator’s preliminary research found that about a third of mobile and broadband customers do not know whether their provider will increase their tariff or by how much.
“Inflation-linked price rises can be unclear and unpredictable,” said Cristina Luna-Esteban, Ofcom’s director of telecoms consumer protection.
“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.”
The National Institute of Economic and Social Research think-tank forecast on Wednesday that one in four households would be unable to cover their full energy and food bills in the next fiscal year, up from one in five this year.
Ofcom noted that consumer law does not prevent companies from increasing prices during a contract period. It added that its rules already stipulated that companies must make any hikes clear to customers before they sign up.
The probe’s findings are expected to be released later this year and could lead to a tightening of Ofcom’s obligations.
BT, Vodafone, TalkTalk, Three and Community Fibre all now increase prices by the CPI inflation rate plus a variable amount. BT, Vodafone and Three add 3.9 per cent, while TalkTalk adds 3.7 per cent.
Hyperoptic, a London-based broadband provider that has not implemented in-contract price rises, has accused its rivals of a lack of transparency.
James Fredrickson, Hyperoptic policy director, said Ofcom’s announcement was “extremely welcome”.
“The solution is simple — customers should be made fully aware, from the beginning of their sales journey, of what they will have to pay for the length of their deal. There can be no more hiding behind small print.”
TalkTalk said that the CPI-linked price rise could be prevented, if the regulator intervened to reduce the wholesale price at which BT’s networking division Openreach sells connectivity to internet service providers.
“There is still time for Ofcom to act and reduce the wholesale price increases that lead to these price rises,” it said.
Michelle Donelan, UK culture secretary, in January told telecoms operators that raising prices at a time when consumers are struggling to pay bills was not “the right thing to do”.
Shadow culture secretary Lucy Powell criticised the “eye-watering rises” that lay ahead, calling on government to “intervene urgently”.