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Ofcom probes transparency of telecoms price rises

Ofcom has today launched an industry-wide enforcement programme into whether in-contract price rises were set out clearly enough by phone and broadband companies before customers signed up.

  • Complaints suggest phone and broadband firms may not have been upfront enough about in-contract price hikes
  • New enforcement programme will scrutinise providers’ sales practices and customer contract information 
  • Pricing trends report gives valuable advice on how to save money in face of rising living costs

Having analysed customer complaints and other preliminary evidence, we are concerned that consumers who took out contracts between 1 March 2021 and 16 June 2022 may not have been provided with sufficiently clear information about in-contract price rises, which are usually applied in March or April each year.

Under our rules over that period, if a provider included potential future price rises in the terms of a contract, they had to be set out prominently and transparently at the point of sale. If the customer hadn’t agreed to those terms when signing up – because they hadn’t been made sufficiently prominent and transparent – providers should have notified them of the price increase and offered them a right to exit penalty-free.1

So Ofcom is now investigating what happened in practice. We will collect further information from a range of providers to assess the steps they have taken to make these terms prominent and transparent.

If we identify specific issues with providers complying with our rules, we may launch separate investigations into individual firms.

"As millions of people are having to deal with rising household bills, it is more important than ever that telecoms companies don’t shirk their responsibilities and keep customers fully informed about what they are signing up to.

It’s vital that people are told clearly upfront about any future price rises they will face while they are in contract, and we’re investigating to check whether this happened in practice."

Lindsey Fussell, Ofcom's Networks and Communications Group Director

Counting the costs

With inflation hitting its highest level for 40 years in 2022, some customers have seen large price rises this year. Ofcom’s latest affordability of communications services tracker, published today, reveals that 9.1 million UK households (32%) are having problems paying for their phone, broadband, pay-TV and streaming bills. That is more than double the level of April 2021.

Our study also shows that 17% of households are now cutting back other spending, such as on food and clothing, to afford their communications services. That is up from 4% in June 2021.

Sealing a deal

As people see their living costs rise, they will be looking to get the best value from their telecoms services. Ofcom’s Pricing Trends report, which covers the prices for broadband, mobile, landline, and pay-TV, has found that there are still good value deals available for those who shop around.

For instance, many out-of-contract customers can save money by switching provider or getting a new deal with their current one.

Out-of-contract broadband customers who buy it on its own or with a landline service pay an average of around £100 a year more than in-contract customers. Those who pay for broadband, landline and pay-TV in a bundled deal pay over £200 a year more, on average, if they are out of contract.

To help people shop around, Ofcom rules mean providers must tell customers when they are approaching the end of their contract. This must include details of any price rise, as well as what their best deals are.

At this point, people could save money by negotiating a new deal with their existing provider – or moving to a new one. And there are millions of households already out of contract who could do this today.

Ofcom also has rules that require telecoms firms to treat financially vulnerable customers fairly. People who are struggling to afford their telecoms bills can contact their provider for support. Depending on their circumstances this could involve switching to a cheaper broadband package or social tariff – typically costing between £12 and £20 per month - as well as payment holidays or deferrals.

Notes to editors

  1. Since 17 June 2022, new, strengthened rules came into force requiring telecoms firms to provide customers with clearer and simpler information before they sign up to a new deal. We have also introduced guidance to explain that providers should include clear examples of how any price increases will affect the price they pay. Some providers offer deals that include a price rise linked to inflation that takes effect during the contract. Firms that use this calculation should provide a straightforward example to a customer of how this is likely to affect the price they will pay. If the increase uses an inflation index such as CPI or RPI, then providers should use the most recent figure for the example.
  2. Individual customers who believe that terms for in-contract price rises were not made clear when they entered into their agreement, and that have since been enforced, can complain to their provider. If a complaint reaches deadlock or is not resolved after 8 weeks, the customer can take their complaint to an Alternative Dispute Resolution (ADR) scheme. More information about ADR schemes can be found here.
Channel website: https://www.ofcom.org.uk/

Original article link: https://www.ofcom.org.uk/news-centre/2022/ofcom-probes-transparency-of-telecoms-price-rises

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