As consumers prepare for a double-digit increase in their bills next fiscal year, mobile phone and broadband providers are accused of concealing inflation-busting price hikes in customer contracts.
Ofcom, the regulator of telecoms, launched an investigation to see if companies were honest with customers about the possibility that bills might rise during their contracts.
Many mobile and broadband contracts have a clause that says that a customer’s contract will increase with inflation every year. This applies even if the deal is only for two years. BT contracts are an example. They rise each year at the Consumer Price Index’s inflation rate plus an additional 3.9pc.
Consumers will see an increase of nearly 14pc next year due to these terms. According to the Bank of England, inflation will be around 10% in January. This fee adds up to inflation-beating price increases in April.
The regulator stated that its investigation would cover the entire industry, but did not identify any particular operators or contracts that were causing concern.
Ofcom stated that it was investigating consumer complaints and is concerned that price variations in consumer contracts between 16 June 2022 and 1 March 2021 may not have been adequately prominent or transparent.
In July, the Telegraph reported that Ofcom was looking into customer contracts in small print and whether they were fair.
Lindsey Fussell is Ofcom’s network director. She stated: “As millions struggle to pay rising household bills, it’s more important than ever for telecoms companies to not shirk their responsibilities” and to keep customers fully informed about the services they offer.
“It is vital that people are informed clearly and upfront about future price increases while they are under contract. We are investigating to see if this has been done in practice.”
Ofcom reported that a third of UK households (roughly 9 million) are having difficulty paying their phone, broadband, and streaming bills due to rising costs.
A BT spokesperson stated that the company’s price increases are “clear” and “predictable, occurring in April every year.” According to the spokesman, the company is committed to customers being notified of any changes in advance and providing clear communications.
“We will follow industry best practices and engage fully with Ofcom’s programme.”
Chief executive of BT rival Hyperoptic Dana Tobak said that this was a significant step in preventing consumer harm from mid-contract price increases. We highlighted this in our April letter to Ofcom. There is overwhelming evidence that consumers don’t know about contract clauses and how they affect them. This is especially important given the current cost of living crisis.
