Phone, broadband and pay-TV companies are to be banned from imposing mid-contract price increases linked to inflation, in a crackdown by the regulator after a Guardian investigation exposed “greedflation” in the sector last year.
Under plans being introduced in January 2025, Ofcom will force providers to tell customers upfront, in “pounds and pence”, about any expected rises throughout the duration of their deals in a victory for campaigners during the cost of living crisis.
The UK’s biggest telecoms providers had inserted terms into contracts imposing annual price increases linked to the consumer prices index (CPI) plus 3.9 percentage points.
Most consumers were unaware of the practice, the regulator said. Some operators have been using the retail prices index (RPI), which is typically higher than CPI, plus the same inflation-busting 3.9 percentage point supplement.
After inflation soared to the highest level in four decades, after Russia’s invasion of Ukraine, this led to some consumers facing price increases of up to 17.3%. This was significantly higher than the 11.1% peak in the government’s preferred measure of inflation in October 2022.
Inflation has since fallen back to 2%, the target set by government for the Bank of England.
However, some economists warned that inflation-busting mobile phone and broadband contracts risked perpetuating the cost of living crisis, and may have forced the central bank to keep interest rates high. Official figures show that inflation in telecommunications services leapt to the highest level since 1991 last spring – when most mid-contract price increases take place.
Pressure had grown on the regulator to act after a media campaign, including the Guardian’s investigation last summer into how the UK’s largest mobile and broadband companies were pushing through the biggest round of price rises for more than 30 years.
The Guardian found that six companies controlling most of the UK telecoms market had charged a 3.9% percentage point supplement on top of their annual inflation-linked increases.
At the time, Labour accused the Conservative government of being “asleep at the wheel” on broadband pricing and said it would ban mid-contract price increases if the party came to power.
Ofcom later revealed that it had received more than 800 customer complaints related to price rises between January and October 2023, double the number received in the same period in 2021.
In December, Ofcom proposed to ban the practice after it carried out a consultation, with the move confirmed on Friday.
From 17 January next year, providers must make clear any information about in-contract price rises to customers before they are bound by a contract, to enable them to make an informed choice. Providers must also set out when any changes to the monthly price will occur.
Cristina Luna-Esteban, Ofcom’s telecoms policy director, said: “With household budgets squeezed, people need to have certainty about their monthly outgoings. But that’s impossible if you’re tied into a contract where the price could change based on something as hard to predict as future inflation.
“We’re stepping in on behalf of phone, broadband and pay-TV customers to stamp out this practice, so people can be certain of the price they will pay, compare deals more easily and take advantage of the competitive market we have in the UK.”
Consumer groups said the changes would help to protect people from unclear contracts but telecoms companies were still free to impose mid-contract price increases that were not linked to inflation.
Tom MacInnes, the interim director of policy at Citizens Advice, said it was right that Ofcom was taking action but he was critical of how long it had taken.
“In the time it’s taken to reach this decision, billions have been added to bills at a time when we know so many are struggling,” he said.
“While we welcome steps to ban inflation-linked hikes, the announcement today falls short of a full ban on prices rising mid-contract. This means that customers might still end up being caught out by above-inflation rises in April next year.”
