Ofcom proposes ban on inflation-linked price rises in mobile contracts

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The UK communications regulator has proposed a ban on inflation-linked price rises during the life of customer contracts for phone, broadband and pay-TV services.

Ofcom on Tuesday suggested a rule to require price rises to be set out “prominently and transparently” at the point of sale in pounds and pence, including being “clear” about when any changes will occur.

The regulator said the requirements would prevent providers from including inflation-linked or percentage-based price rise terms in all new contracts.

Telecoms operators typically add about 3.9 per cent to the annualised rate of consumer or retail price inflation, and were criticised by the government this year for imposing price rises of more than 14 per cent.

Dame Melanie Dawes, chief executive of Ofcom, said: “Most people are left confused by the sheer complexity and unpredictability of inflation-linked price rise terms written into their contract, which undermines customers’ ability to shop around.”

She added consumers needed clarity at a time when “household finances are under serious strain”.

Telecoms groups have previously argued the increases were necessary to fund investment costs as demand for data rises.

Analysis by the regulator found more than half of mobile customers, equivalent to 36mn, and four in 10 broadband customers, 11mn, were on contracts subject to inflation-linked price rises as of April this year.

It added that only 12 per cent of mobile customers and 16 per cent of broadband customers were both aware of the price rise and able to identify that it was inflation-linked.

Ofcom said these terms required customers to “unfairly assume the risk and burden of financial uncertainty from inflation”.

It reported receiving more than 800 complaints related to price rises between January and October 2023, almost double the number during the same period in 2021.

Rocio Concha, director of policy and advocacy at consumer rights group Which?, called the proposal “a huge win for consumers” and said “providers must stop this practice immediately”.

Research by the charity Citizens Advice in October found that mobile and broadband bills in the UK were set to rise 9 per cent on average next year, with mid-contract payments expected to cumulatively increase by £770mn.

Matthew Upton, its acting executive director of policy and advocacy, warned the regulator’s new proposals “still leave the door open to providers putting ‘prices may vary’ small print in their contracts”.

Ofcom is consulting on the proposal to ban inflation-linked mid-contract price rises until February 2024 and plans to publish its final decision in spring 2024.

BT said it would “review the consultation in detail”.

Virgin Media O2 said it had “always been clear and transparent with our customers regarding any price changes” and that it is “closely reviewing” Ofcom’s proposals.

The company added it appreciated price increases were “never welcome” but said it was “vital that operators are able to keep investing”.

Vodafone did not immediately respond to requests for comment. Three did not immediately comment.