Dialling up prices: Why mobile and broadband consumers need better protections from unfair pricing practices
A year on from when Citizens Advice first sounded the alarm over inflation-busting price rises for mobile and broadband customers, people are facing yet another hike in the spring of 2024.
36 million mobile customers and 20 million broadband customers may see bills rise by a total of more than £1.4 billion next year due to price hikes. This comes on top of a historically high £2.2 billion that was added to bills in April this year.
£770 million of this will hit those still inside their minimum-term contract period, and £660 million will affect those whose contracts are out of their minimum term
But it’s not just the size of price rises which is worrying.
Our research over the last year has found that terms like ‘prices will rise by Consumer Prices Index (CPI) + 3.9%’ are common across the market but are poorly understood by consumers. In fact, one in three people on contracts linked to CPI say they have never even heard of it.
Moreover, terms like this make it unreasonably difficult for people to work out what they will be paying in the future when they sign up to fixed term contracts. This is harmful to consumers and damaging to competition.
Ofcom are currently reviewing the use of inflation-linked terms within minimum-term price rise policies - and, while we welcome this, they should use this opportunity to look beyond this specific issue and tackle all unfair price-rise practices in the telco market.
When it comes to mobile and broadband contracts, fixed should mean fixed.
Our research shows that customers have a clear preference for properly fixed prices.
68% would prefer to have the total cost spread out evenly across the contract term - even when monthly costs are slightly higher than the initial price of a contract which increases halfway through.
62% said this was because it would make it easier for them to plan and budget.
Switching and shopping around are supposed to act as safeguards against unfair price rises - but only 10% of mobile customers and 8% of broadband customers who faced historic price rises in April switched to avoid them, even though we estimated nearly half of mobile and one third of broadband customers could have done so penalty-free.
Switching contracts isn’t easy for everyone - and the burden isn’t felt equally.
1 in 5 consumers say they find it difficult to switch contracts or renegotiate with their provider - but this rises to 1 in 4 for disabled people and nearly 1 in 3 people with chronic mental health conditions.
We’re asking Ofcom to ban all mid-contract price rises - and our report sets out why such an approach would be welcomed by consumers and drive better outcomes.
As problems around price rises are not just limited to those which occur mid-contract, we also call on Ofcom to take this opportunity to explore appropriate approaches to ensure those outside their minimum terms are also protected.