Telecom customers must be told upfront in pounds and pence about any price rises their provider includes in their contract, under new consumer protection rules announced by Ofcom. mid-contract inflation price rises

In recent years, many major UK phone, broadband and pay TV companies have changed their contract terms to include price rises linked to future inflation rates.

This leaves customers without sufficient certainty and clarity about the prices they will pay, and unfairly assuming the risk and burden of financial uncertainty from inflation, which people cannot predict and do not understand well. So Ofcom has decided to ban this practice.

Under new Ofcom rules, any price rise written into a customer’s contract from January 2025 will need to be set out in pounds and pence, prominently and transparently, at the point of sale; and providers will need to be clear about when any changes to prices will occur.

Example of how the £/p requirement will apply:

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, said Cristina Luna-Esteban, Ofcom Telecoms Policy Director

Competition helps keep prices down

Over the last five years, average prices for broadband and mobile services in the UK have fallen in real terms. At the same time, companies have been investing in upgrading their networks, with the availability of full fibre increasing tenfold and average speeds and data use doubling.

This is a result of the UK’s competitive telecoms markets, in which providers set their prices. Customers can choose from a range of different types of packages, and several providers offer fixed-price contracts.

Ofcom’s job is to make sure consumers can shop around with confidence and take advantage of this. Under their current rules – which Ofcom strengthened in 2022 – providers that specify price rises in contracts from the start must make this clear before customers sign up. If they don’t, they must give customers one month’s notice and the right to exit penalty-free when they increase prices mid-contract.

Review of inflation-linked price rises

In recent years, more and more providers have been including an annual price rise in their contracts that is linked to future inflation, which is very hard to predict, plus an additional percentage – typically 3.9% – implemented every March or April.

Ofcom estimates that, as of April 2024, around six in ten broadband and mobile customers were on contracts subject to inflation-linked price rises.

Ofcom has been concerned that this makes it difficult for customers to know what they will pay throughout their contract. So last year Ofcom reviewed this pricing practice and proposed to ban it, after their consumer research found that awareness and understanding of these terms are very low.

What Ofcom found

More than half of broadband customers (55%) and pay monthly mobile customers (58%) do not know what inflation rates such as CPI and RPI measure. And of those who are with providers that use inflation-linked price rises, very few broadband customers (16%) or mobile customers (12%) were aware of the price rise and able to identify that it was inflation-linked with an additional percentage.

Ofcom also found that, even when people do consider future inflation-linked price rises when choosing a contract, they often do not understand them fully and find it difficult to estimate what the impact could be on their payments.

Tougher new rules from January

From 17 January 2025, phone, broadband, and pay-TV providers will be prohibited from including inflation-linked, or percentage-based, price rise terms in all new contracts. This means consumers will be able to enter into contracts featuring £/p information ahead of annual price rises in 2025.

Some providers require this time to make the necessary changes to their processes and business plans. However, other providers will be able to do it sooner and don’t have to wait for the deadline. Indeed, BT and Vodafone have already changed their pricing practices in response to Ofcom‘s consultation.

1. UK telecoms market over the last five years (2023 prices):
   

   	2018	2023
   Average superfast broadband bundle list price	£48.71	£42.28
   Average monthly mobile price, excluding handset costs	£17.12	£11.51
   Full-fibre broadband availability	6%	57%
   Median average fixed broadband download speeds	37.0 Mbit/s	69.4 Mbit/s
   Average monthly household fixed broadband data use	240 GB	535 GB
   Average monthly mobile data use	3.4 GB	9.8 GB

2. Nationally representative samples of adults aged 16+ in the UK were surveyed in January 2023 (4,213) and October 2023 (4,232).