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Inflation-Based Price Hikes: The Unfair Practice Challenging Telecom Consumers

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In a comprehensive study of 2,000 broadband ISP and mobile consumers commissioned by Uswitch, it has been identified that an overwhelming majority of 85% perceives the annual hikes in prices as “unfair”. Surprisingly, the same survey concluded that 87% of the individuals believe they should possess the right to switch their provider without any penalties in case of a mid-contract price surge. Known for typically raising their prices by up to 4% annually, all in addition to an inflation-oriented metric such as the CPI (Consumer Price Index) or RPI (Retail Price Index), broadband and mobile service providers take refuge in their contracts’ terms and conditions, and thereby leave customers uninformed about the potential scales for price increases.

Compounding the issue, providers tend to impose penalties on customers who end their contracts prematurely, making it challenging for consumers to change their providers in case of sudden increases in their monthly bills. The survey indicates that 40% of respondents expressed their apprehension in not being able to anticipate the degree of price hikes they may encounter, standing as the biggest concern for these customers.

An escalating phenomenon, 62% of the participants agreed that they will turn to different providers as soon as possible in case of unexpected price hikes. Responding to this trend, Ofcom, in February, decided to introduce an inquiry into the inflation-based mid-contract price surges to ascertain if phone and broadband customers have a grasp over the prices they can expect to shell out.

Cristina Luna-Esteban, Ofcom’s Director of Telecoms Consumer Protection, remarked, “Customers need certainty and clarity about what they will pay over the course of their contract. But inflation-linked price rises can be unclear and unpredictable. So we’re concerned that providers are making it difficult for customers to know what to expect.”

The call to end the inflation-based annual price surges in broadband and mobile contracts was advocated by Uswitch spokesperson and Head of Broadband and Mobiles, Ernest Doku. It was buttressed by Which?, emphasizing that customers of EE, Three, and Vodafone, on average, could predict price increases of over 8% in 2024, while O2 customers might witness their bills go up by over 10%.

In response to a rising need for transparency, this year brought fresh directions from the UK Committees of Advertising Practice, detailing how service providers and ISPs should elucidate potential price rises to their customers. These directions are expected to be in effect at the end of the year. The Advertising Standards Authority stated emphatically, “It is crucial that information about any future price increases are clear to consumers in the ad itself, to avoid creating a misleading impression that the initial stated price will remain the same throughout the contract period.” Ofcom plans to publish its consultation paper detailing the review in December.

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