BT’s Simpler Pricing Strategy: Illuminating Broadband Costs

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In the wake of Ofcom’s recent enforcement for clearer broadband advertising and against mid-contract price surge, BT has announced plans to adopt a simpler pricing strategy beginning this summer. The company issued a press release stating, “Starting in early summer, we will introduce a pricing model consistent with Ofcom’s approach, eschewing complex percentages and CPI metrics for a clearer representation in ‘pounds and pence’.”

The shift signifies that broadband customers are projected to see a rise of approximately £3 per month, while mobile customers may experience a surge around £1.50. However, these changes will only transpire following the company’s next price increase.

Under the current pricing model of BT, the prices for customers get adjusted annually by the rate of inflation (CPI) plus an additional 3.9%. Often, advertising rates linked to inflation figures can muddle consumers as the exact surges aren’t often displayed, only an approximate percentage surge and ambiguous inflation metric. Hence, about 55% broadband consumers and 58% mobile clients, who pay monthly, are left oblivious about metrics such as CPI and RPI.

Moreover, there’s a significant rise in consumer complaints about the large-scale mid-contract price increases, with BT’s surge hitting 14.4% last year.

Ofcom’s research indicates that a significant proportion of broadband and mobile customers were hitched to contracts with inflation-linked price surges; four in ten broadband customers (equivalent to 11 million) and over half of mobile customers (totalling 36 million) as of April 2023. Ofcom CEO Dame Melanie Dawes claimed, “Most people are bemused by the convoluted world of inflation-linked price surges and terms of their contract, which ultimately undermines consumers’ ability to make informed decisions.”

In wake of the rising dissatisfaction, Ofcom proposed a ban on these inflation-anchored mid-contract price surges in mid-December and have since been under consultation. This is scheduled to conclude on 13th February, with the final decision set to be published.

Given these developments, it’s expected that the rest of UK’s network operators will soon be echoing similar measures. Ofcom is anticipating implementing these new changes later this year.

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