Regulator Proposes Banning Price Rises Linked to Inflation
Millions of households could benefit from new proposals by the regulator that would ban mobile and broadband providers from linking price rises to inflation figures. The regulator has found that customers are often hit with mid-contract increases that they struggle to understand. According to Ofcom's analysis, more than half of mobile customers and around four in 10 broadband customers were on inflation-linked contracts in April this year.
Lack of Knowledge Among Customers
Despite the prevalence of inflation-linked contracts, a survey conducted by Ofcom found that customers have very little knowledge of the details. Only 16% of broadband customers and 12% of mobile customers were aware that their costs could rise, and that any increase would be linked to inflation with an added percentage on top.
Rampant Inflation Increases Monthly Payments
Over the past two years, inflation has been on the rise, greatly increasing the monthly payments of many mobile and broadband customers. Consumer Price Inflation (CPI), a measure of how quickly prices are rising, peaked at 11.1% in October last year. This means that the prices of goods and services purchased by the average Briton rose by an average of 11.1% between November 2021 and October 2022.
Tougher Protections Proposed
Ofcom has provided an example to demonstrate the impact of the proposed new rules. Under the current system, an advert for a plan costing £30 initially but rising by CPI plus 3.9% would have to change. The new advert would state the following: "Monthly subscription price: £30.00 until March 31, 2024. Increasing to £31.50 on April 1, 2024, and £33.00 on April 1, 2025." Ofcom chief executive Dame Melanie Dawes stated that the proposed tougher protections would give customers the clarity and certainty they need to secure the best deal for their needs and budget.
Consultation and Future Implementation
Ofcom will consult on the proposed new requirement until February 13, 2024, and plans to publish its final decision in spring 2024. The new rule is expected to come into effect four months after the publication of the final decision.
Tips for Cutting Broadband and Mobile Costs
To save money on broadband and mobile services, consider switching suppliers when your contract expires. If you are outside the minimum term of your contract, you won't need to pay a cancellation fee and may be able to find a cheaper deal elsewhere. If you are still within your contract period, be aware that you may be charged an exit fee. When comparing deals, consider the speed and data you need for broadband and the minutes, texts, and data you use on your mobile. Use comparison websites, such as MoneySupermarket and Uswitch, to find the best tariffs and phone prices. It may also be worth using your research to negotiate a better deal with your current provider.
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