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CAB - Broadband prices rise by an average 43% when fixed term deals end

People on the cheapest basic broadband deals are hit with an average price rise of £113 a year once their deal ends - with many unaware they face an increase in cost, finds Citizens Advice.

A new report from the national charity reveals that more than a third (35%) of broadband customers don’t realise they could face price hikes by staying on the same contract with their provider after their initial deal ends.  

With broadband customers staying on the same contract for 4 years on average, Citizens Advice warns customers are being charged a ‘loyalty penalty’ for remaining on the same deal.

Citizens Advice wants broadband providers to help customers avoid loyalty penalties by being much clearer about how much their services will cost after the initial fixed deal ends.

Analysis of the cheapest basic broadband deals from the 5 largest suppliers finds that prices go up by an average of 43%, or £9.45 extra a month, at the end of the fixed contract period. This adds an additional £113 a year to a customer’s bill.

This table compares the initial monthly price of a fixed contract and subsequent monthly price of the 5 largest suppliers’ cheapest basic broadband deals as advertised on their website on 10 March 2017.  The contract length for the cheapest deal varies across suppliers.

Provider  & cheapest basic broadband deal

Monthly tariff during fixed contract period

Monthly tariff after fixed contract period

% increase

Monthly difference

The annual loyalty penalty

 

The loyalty penalty over 4 years

BT 12 month

£24.49

£40.99

67%

£16.50

£198.00

£594

Virgin Media 12 month

£32.25

£32.25

0%

£0.00

£0.00

£0.00

Talk Talk 24 month

£20.00

£25.50

28%

£5.50

£66.00

£132

Sky 12 month

£18.99

£28.99

53%

£10.00

£120.00

£360

EE 18 month

£21.00

£28.50

36%

£7.50

£90.00

£225

Citizens Advice wants providers to include up-front information in advertising and when people take out the contract - instead of details only in the terms and conditions - and texts when the fixed price comes to an end.  

The charity also believes extra protections are needed for customers who are more vulnerable.  The report finds that older and poorer customers are more likely to face a loyalty penalty because they stay with the same supplier for longer.  

A survey of over 3,000 consumers finds broadband customers aged 65 or over are more than twice as likely than customers under 65 to have been in the same contract for more than 10 years.

Similarly people on a low income are almost 3 times as likely as high earners to be in their contracts for 10 years or more.

The report recommends that Ofcom should define the vulnerable consumers who would be worst affected by broadband contract prices rises and explore ways to minimise the impact on them.  One option could be to look at how a price cap, similar to the pre-payment meter cap in the energy market might work for broadband customers.

Action by Ofcom to support vulnerable broadband consumers would build on the regulator’s recent proposals to reduce the bills of BT customers who only have a telephone landline (often elderly or vulnerable) by at least £5 per month.

Gillian Guy, chief executive of Citizens Advice, said:

“Loyal broadband customers are being stung by big price rises once their fixed deal ends.

“People often choose their broadband deals based on the price that works for them - but our evidence shows that many do not realise the price will rise after the end of the fixed deal.  With people staying with their supplier for an average of 4 years, these extra costs can run into hundreds of pounds.

“Older customers and those who have less money are more likely to stay with their supplier for longer meaning their loyalty penalty could reach over a thousand pounds.

“The government has rightly put energy firms on warning for how they treat loyal customers - the actions of broadband firms warrant similar scrutiny. Extra protections for vulnerable consumers are also a must.”

The extra amount people are charged once their initial contract period ends has increased over the last 6 years. In 2011, research found consumers were paying on average £1.58 or £1.84 a month extra depending on their broadband connection. Citizens Advice now finds the average price hike is £9.45 a month - 5 times more than in 2011.

Exploring the loyalty penalty in the broadband market report

Notes to editors

  1. Citizens Advice looked at the cheapest basic broadband contracts offered by the five largest broadband providers, representing 91% of the broadband market. The minimum periods for these contract were 12 months for BT, Sky and Virgin Media, 18 months for EE and 24 months for Talk Talk. The prices used in this report are correct as of 10th of March 2017.
  2. Basic broadband deals refers to broadband contracts with the minimum number of additional services. All providers other than Virgin Media require customers to pay for line rental as part of their basic broadband deals. The Virgin Media basic broadband deal is fibre optic and therefore does not include line rental.
  3. The average rise of 43% - or £9.45 a month and £113 a year -  has been calculated by weighting suppliers’ share of the UK broadband services.
  4. Average price rises from 2011 are from research by uSwitch from 9 February 2017.
  5. Citizens Advice research found that 77% of people who have been in their broadband contract for two or more years, have also stayed with on the same energy contract for the same period.
  6. The 4 year loyalty penalty is calculated based on the total difference customers pay over 4 years - once their fixed contract period has ended.
  7. Additional figures are from a survey run by Populus for Citizens Advice in January 2017. Populus ran an online survey of 3196 consumers in the energy, telecoms and financial services market. Data were weighted to be representative of the UK population.
  8. Low-income households defined as earning between £7,001 and £21,000. High income defined as those earning more than £55,001.
  9. The Citizens Advice service comprises a network of local Citizens Advice, all of which are independent charities, the Citizens Advice consumer service and national charity Citizens Advice. Together we help people resolve their money, legal and other problems by providing information and advice and by influencing policymakers. For more see the Citizens Advice website.
  10. The advice provided by the Citizens Advice service is free, independent, confidential and impartial, and available to everyone regardless of race, gender, disability, sexual orientation, religion, age or nationality.
  11. To get advice online or find your local Citizens Advice in England and Wales, visit citizensadvice.org.uk
  12. You can get consumer advice from the Citizens Advice consumer service on 03454 04 05 06 or 03454 04 05 05 for Welsh language speakers.
  13. Local Citizens Advice in England and Wales advised 2.5 million clients on 6.2 million problems in 2014/15. For full service statistics see our publication Advice trends.
  14. Citizens Advice service staff are supported by more than 21,000 trained volunteers, working at over 2,500 service outlets across England and Wales.
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