Ofcom proposes ban on inflation-linked mid-contract price rises

In an effort to safeguard consumers against complex and unpredictable telecom pricing, Ofcom has proposed a significant rule change.

The UK’s communications watchdog seeks to ban inflation-linked mid-contract price rises, a practice that has increasingly burdened customers with financial uncertainty.

Currently, most major phone, broadband, and pay-TV companies include mid-contract price rises tied to future inflation rates, a practice Ofcom believes lacks sufficient clarity.

The proposed rule would require providers to explicitly state price changes in pounds and pence at the point of sale, offering customers a clearer understanding of their financial commitments.

Ofcom’s analysis reveals that a substantial number of broadband and mobile customers are subject to these inflation-linked price rises.

However, awareness and understanding of these terms are notably low, with many customers unaware of how inflation rates such as CPI and RPI affect their bills.

This confusion has led to a significant increase in complaints and highlights the need for more straightforward pricing.

Dame Melanie Dawes, Ofcom’s Chief Executive, emphasised the importance of clear pricing: “At a time when household finances are under serious strain, customers need prices to be crystal clear. But most people are left confused by the complexity and unpredictability of inflation-linked price rise terms in their contract, which undermines their ability to shop around.”

Ofcom is consulting on this proposed requirement until February 13, 2024, and expects to publish its final decision in spring 2024.

The new rule could come into effect four months after this decision, balancing consumer protection with the need for providers to adjust their processes.

Ofcom has also revealed that take-up of social tariffs more than doubled in the last year, but millions of eligible customers remain unaware of them.

Social tariffs are cheaper broadband and phone packages for people claiming Universal Credit, Pension Credit and some other benefits. Some providers call them ‘essential’ or ‘basic’ broadband.

Take-up of social tariffs increased to 380,000 in September 2023, up from 147,000 a year earlier, meaning more customers are benefitting from the savings the tariffs offer. However, awareness among eligible customers remains a challenge. Just over half (55%) of eligible households remain unaware of social tariffs; and while take-up is improving, it remains low as a proportion of all eligible households (8.3%).

For the first time, we have published take-up figures for each of the largest providers of broadband social tariffs.

BT has the largest share of broadband customers taking a social tariff (72%), followed by Sky (13%), Virgin Media (6%), Vodafone (4%), KCOM (1%) and Shell Energy (0.3%).

These proportions are partly a reflection of the length of time over which different social tariff products have been available.

TalkTalk is the only major broadband provider not to offer a social tariff.