Nearly 13 million mobile and broadband customers to be hit by inflation-busting 4.5% mid-contract price rises next week - but will be penalised if they leave[1]
Mid-term price rises should mean you are free to quit your deal[2], but increases are now included in customers’ contracts and communicated at the point of sale, to get around Ofcom rules
Mobile and broadband companies including BT, EE and Vodafone now hike bills every year by the rate of inflation (CPI) plus 3.9%
More than two fifths of (43%) mobile and almost one in ten (9%) broadband customers now face bill increases they cannot escape from[3]
Other sectors such as energy and insurance do not raise prices in the middle of a fixed contract
Uswitch.com calls on Ofcom to act to make sure customers have a get-out clause to avoid mid-contract price rises so consumers can have certainty of the price they will pay.
Almost 13 million mobile phone and broadband customers will next week see their bills rise in the middle of their contract by 4.5%[1], reveals research by Uswitch.com, the comparison and switching service.
The mid-contract price rise will cost consumers an extra £11 million a month, but none of them will be able to walk away from these increases without paying a penalty[2].
Ofcom rules say that customers must be given one month’s notice of any rise in the monthly fee, and allowed to exit the contract without penalty[2]. However, telecoms companies use a loophole in this rule by writing yearly increases into contracts and communicating it to customers when they sign up.
BT, EE and Vodafone now increase their prices every year for most customers by the rate of inflation (CPI) plus 3.9%, while others, such as O2 increase prices by the rate of inflation (RPI) and Three by a flat 4.5%. Since this increase is written in their contracts, more than two fifths of mobile (43%) and almost one in ten (9%) broadband customers are unable to leave penalty-free{3}.
Table: Broadband price rises
| Provider | Price rise | Takes effect | Can you cancel penalty free? |
|---|---|---|---|
| BT | Up to 4.5% | 31st March | No |
| Plusnet | Up to 4.5% | 1st June | No |
| Sky | Capped at £6 a month | 1st April | Yes |
| TalkTalk | Up to £36 per year | 1st April | Yes |
| Virgin Media | Up to £54 per year | 1st March | Yes |
Source: Uswitch.com, data correct as at 23/3/21
Table: Mobile price rises
| Provider | Price rise | Takes effect | Can you cancel penalty free? |
|---|---|---|---|
| BT | Up to 4.5% | 31st March | No |
| EE | Up to 4.5% | 31st March | No |
| O2 | 1.4% | April bill | No |
| Three | Up to 4.5% | April bill | No |
| Vodofone | Up to 4.5% | April bill | No |
Source: Uswitch.com, data correct as at 23/3/21
Inflation is currently low, with the December’s figure (CPI) used to calculate most of the spring price rises standing at 0.6%. However, if inflation rose to 3% — as it did as recently as 2018 — it would mean bills increasing by a massive 6.9%, equal to £16 extra a year for someone on a £20-a-month contract[4].
Uswitch.com experts question the need for mid-contract price rises, as there are none in the fixed tariffs offered by the energy and insurance markets. And while customers once had a choice to switch to providers that didn’t impose such increases, in recent years the main players in the market have all brought in similar policies.
Uswitch.com is calling for the industry watchdog Ofcom to act to give consumers the option of exiting their contract without penalty and avoid any price rises, establishing the principle that a fixed length contract comes with a fixed price.
Richard Neudegg, head of regulation at Uswitch.com, comments: “Millions of mobile phone and broadband customers are being hit by mid-contract price rises of 4.5% at a time when inflation is below 1%.
“Ofcom’s rules were supposed to allow consumers to leave their deal penalty-free if their bills go up, but providers have got around this by writing these increases into customers’ deals.
“Given the majority of telecoms providers are now using this tactic to prevent their customers from freely walking away from their contracts when prices go up, consumers have little choice but to accept this practice, taking a gamble on where future inflation rates will land. Now is the moment the regulator needs to step in and stamp out this loophole.
“What’s frustrating for customers is that in other sectors, such as energy and insurance, the price you sign up for doesn't increase until the deal ends - it’s a case of fixed price as well as fixed term. There really is no special case for this to be different in telecoms.”
Find out how much you could save a year with Uswitch.com here.
FOR MORE INFORMATION
Rory Stoves
Phone: 020 3872 5613
Email: rory.stoves@uswitch.com
Twitter: @UswitchPR
Notes to Editors
1. O2 has 26.4 million mobile customers. O2 customers who signed up before 23/01/14 will see no mid-contract price rise this year, but those who signed up after this date will face a 1.4% rise. Opinium surveyed a sample of 17,601 UK mobile phone bill-payers from 29th October to 9th November 2020. Respondents were asked ‘When did you start your current mobile contract?’ 89% of mobile phone bill-payers started their contract after 23/01/14. 89% of 26.4 million O2 subscribers = 23.4 million O2 subscribers face 1.4% price rise. Assuming a £20 a month contract, this is 1.4% x £20 = £0.28 a month increase. £0.28 x 23.4 million = £6.6 million a month increase.
Three has 13.3 million subscribers. Three customers who signed up before 29/05/15 will see no mid-contract price rise this year. 11% of customers were in this category. Those who signed up between 29/05/15 and 28/10/20 (67% of customers) will face a 1.4% rise. Those who signed up after 29/10/20 (22% of customers) will face a 4.5% rise. 8.9 million customers face a 1.4% rise and 2.9 million face a 4.5% hike.
EE has 27.5 million subscribers. EE customers who signed up before 31/08/20 (78% of customers) will face a 1.2% rise. Those who signed up after 01/09/20 (22% of customers) will face a 4.5% rise. 21.4 million customers face a 1.2% rise and 6 million face a 4.5% hike.
BT has 30 million consumer subscribers. BT customers who signed up before 31/08/20 (78% of customers) will see a 0.6% rise. Those who signed up after 01/09/20 (22% of customers) will face a 4.5% rise. 8 million customers face a 0.6% rise and 2.2 million face a 4.5% hike.
Vodafone has 17.3 million subscribers. Vodafone customers who signed up before 09/12/20 (90% of customers) will see a 1.4% mid-contract price rise this year. Those who signed up after 09/12/20 (10% of customers) will face a 4.5% rise. 15.6 customers face a 1.4% rise and 1.7 million face a 4.5% hike. Customers facing a 4.5% price rise = 2.9 million + 26.7 million + 29.1 million + 1.7 million = 60.4 million. Assume average £20 a month. 4.5% of £20 = £0.90. £0.90 x 60.4 million = £54.4 million.
TalkTalk has 913,000 mobile and 4.2 million broadband customers. Sky has 437,000 mobile and 6.2 million broadband customers. Virgin Media has 3 million mobile and 5.28 million broadband customers.
2. Ofcom: Protection for consumers against unexpected mid-contract price rises
3. 38.8 million mobile customers are in a contract they cannot leave penalty free. 38.8 million / 89.9 million mobile customers = 43%. 2.3 million broadband customers are in a contract they cannot leave penalty free. 2.3 million / 25 million broadband customers = 9.3%.
4. Inflation of 3% + 3.9% = 6.9% potential rise. 6.9% x £20 average monthly bill = £1.38. £1.38 x 12 = £16.56 rise a year.
About Uswitch
Uswitch is one of the UK’s top comparison websites for home services switching, including energy, broadband and mobiles.
More people go to Uswitch to switch their energy, broadband and mobile than any other site, and we have saved consumers over £2.7 billion off their bills since we launched in September 2000.
Free mobile app Utrack also helps households manage their home energy usage and make potential savings.
Uswitch is part of RVU, a group of online brands with a mission to empower consumers to make more confident home services, insurance and financial decisions.
