Ofcom to review phone and broadband price hikes amid concern customers don’t know what they’re signing up to

The UK’s telecoms regulator, Ofcom, has launched a review into the practice of inflation-linked, mid-contract price increases for mobile and broadband services.

The review will examine the extent to which customers are aware of these increases and understand how they are calculated.

Preliminary research by Ofcom has revealed that a third of mobile and broadband customers are not aware of their provider’s ability to raise prices.

Half of those who are aware are uncertain about how the calculation will be made.

The regulator is concerned that a significant number of customers, nearly half, do not understand the Consumer Price Index (CPI) and Retail Price Index (RPI).

Ofcom is taking a closer look at the practice of in-contract price rises linked to inflation and percentage changes, which several telecom firms introduced in 2021.

While general consumer law prevents companies from raising prices during a contract, many telecom firms choose to do so with some offering customers a 30-day notice and a penalty-free exit option.

Others specify price rises in the contract from the start.

Ofcom already has strict rules in place requiring providers to make it clear to customers about price rises specified in the contract before they sign up. The regulator is currently enforcing these rules to ensure that companies are adhering to them.

The review is being launched at a time when households are facing financial stress and it is vital for customers to have a clear understanding of the prices they will pay over the course of their contract.

With inflation rates being unpredictable, it can be challenging for customers to know the cost of inflation-linked price rises in advance.

The Director of Telecoms Consumer Protection at Ofcom, Cristina Luna-Esteban, has stated that the review aims to assess whether additional protections are necessary to ensure that customers have sufficient certainty and clarity about the prices they will pay over the duration of their contract.

She 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.”

“In the meantime, there are some simple things many people could do today to cut their bills.”

“Millions of customers are either out of contract or with a provider that lets them walk away if prices go up.”

“So we’re urging everyone to check their account and see what their options are.”

The initial findings are expected to be published later this year.

Matthew Upton, Director of Policy at Citizens Advice, has called for rapid action on inflation-linked, mid-contract price rises, saying that companies should do everything in their power to help consumers by making pricing crystal clear.

Richard Neudegg, director of regulation at Uswitch.com, has welcomed Ofcom’s review but stressed that action is needed. He believes that consumers must be given the opportunity to leave penalty-free if prices increase and that the current Ofcom rules are inadequate.