Home Money Telecommunications providers are prohibited from raising inflation-related prices, but new rules could make bills more expensive

Telecommunications providers are prohibited from raising inflation-related prices, but new rules could make bills more expensive

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Failed shakeup: New Ofcom rules will lead to price rises, experts warned

Households are willing to shell out more money for their phone and broadband, despite a ban on mid-contract price increases coming into effect last week.

Last summer, regulator Ofcom ruled that telephone, broadband and pay-TV providers were banned from inflation-linked or percentage-based price rise terms in all new contracts.

Ofcom said the previous rules meant customers were left “without sufficient certainty and clarity about the prices they will pay”.

From this month, suppliers must prominently inform their customers of how much the price increases will be in pounds and pence, and when the price changes will occur.

The new rules apply to consumers with contracts signed after January 17.

On the surface, the rules might protect consumers but – as This is Money has warned since last summer – they will not protect against widespread price increases.

Instead, consumers could face increased internet and phone costs of up to 15 percent, as the regulator only requires that price increases be clearly communicated.

Failed shakeup: New Ofcom rules will lead to price rises, experts warned

Last August, we warned that because Ofcom was not imposing a cap on how much companies were allowed to charge, they could theoretically drive up prices even further.

Broadband comparison site Broadband Genie has warned further, saying that the implementation of stricter regulations will lead to broadband providers raising prices across the board.

Peter Ames, spokesman for the site, said: ‘It is disappointing to see that some providers have used Ofcom regulation to show pound and pence price increases as an opportunity to increase prices further.

‘Plusnet’s £3 price tag, for example, is a 12 per cent increase for customers of its cheapest packages.

‘Similarly, Virgin Media’s cheapest and most popular package costs around £23 a month. Therefore, its £3.50 price increase represents a staggering 15 per cent increase.

“This is larger than the price increase we saw in 2023, at the height of inflation.”

This Is Money warned of an effective poll tax on broadband, where everyone would pay the same amount regardless of the cost of their mobile phone or broadband contract.

This means that those with cheaper mobile phone and internet deals face much steeper increases than those with more expensive deals. And the blame may lie primarily with Ofcom.

“What we are seeing is the direct result of crude regulation that has clearly been poorly thought out and has not sufficiently taken into account its implications,” says Ames.

‘As always, we believe the only solution is for Ofcom to finally remove price rises completely, once and for all. Some suppliers may offer fixed prices, why can’t those with higher profit margins do the same?

Andy Aitken, chief executive and co-founder of rival Honest Mobile, has also called for a complete ban on mid-contract increases.

‘They thrive on a lack of clarity, and terms like ‘prices may vary’ are a loophole they can exploit to push for unfair increases. It’s like we left the back door wide open.

‘The final result? Mid-contract price increases should be banned entirely. There is no other contract that you enter into for a fixed term that increases by half.

‘It doesn’t happen with your insurance, your mortgage, your energy bill or your car. So why should it happen on your mobile or broadband?

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