Ofcom plans to improve mid-contract price rise transparency

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UK telecoms regulator Ofcom has announced plans to improve transparency around mid-contract prices.

The regulatory body has expressed concerns about the prevalent practice of mid-contract price rises – often linked to unpredictable inflation – adopted by major phone, broadband, and pay TV companies. In response, Ofcom is suggesting tougher protections for consumers by considering a ban on this practice.

Confusing price rise terms

Ofcom argues that unclear terms related to price rises could undermine the competitive nature of the telecoms market. Despite occasional increases in broadband prices, average costs for broadband and mobile services in the UK have decreased over the last five years. 

However, the regulator contends that the lack of certainty in contract prices – especially with the rising trend of inflation-linked increases – hampers consumers’ ability to confidently shop around for the best deals.

According to Ofcom’s analysis, as of April 2023, a significant portion of broadband and mobile customers were on contracts subject to inflation-linked price rises. Despite this, awareness and understanding of these terms among consumers were alarmingly low.

Between January and October 2023, Ofcom received a notable increase in complaints related to price rises—indicating a growing concern among consumers.

Enhancing transparency

To address these issues, Ofcom is proposing a new rule that would require providers to state any prices in pounds and pence at the point of sale—including clear information about when price changes may occur. This move aims to prevent providers from incorporating inflation-linked or percentage-based price rise terms in new contracts.

Ofcom is currently seeking public input on the proposed rule until 13 February 2024, with plans to publish the final decision in spring 2024. The regulator aims for the new rule to take effect four months after the final decision is made.

Simultaneously, Ofcom is investigating whether certain phone and broadband companies complied with previous rules between March 2021 and June 2022. This includes concerns about clear communication of price rises. Enforcement action may be taken against non-compliant providers.

“At a time when household finances are under serious strain, customers need prices to be crystal clear. But 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,” says Dame Melanie Dawes, Chief Executive of Ofcom. 

“Our tougher protections would ban this practice once and for all, giving customers the clarity and certainty they need to secure the best deal for their needs and budget.”

(Photo by Emil Kalibradov on Unsplash)

See also: In the fast lane: Analysing the UK’s leading broadband players

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