UK communications regulator Ofcom has banned mid-contract price rises linked to inflation.
The change, which comes into effect from January 2025, means that price rises must be clearly written into contracts. Ofcom noted that BT and Vodafone had already changed their pricing practices accordingly.
Cristina Luna-Esteban, Ofcom Telecoms Policy Director, criticized the practice of vendors tying customers into contracts where the price could change based on inflation. Future inflation is difficult to predict, after all.
Luna-Esteban said. “We’re stepping in on behalf of phone, broadband and pay TV customers to stamp out this practice, so people can be certain of the price they will pay, compare deals more easily and take advantage of the competitive market we have in the UK.”
Ofcom proposed the ban in 2023 after UK inflation soared during the previous years, making it impossible for customers to predict what they might be paying during a contract’s term. The imposition of early termination fees for customers seeking to escape what they saw as an unexpected rise added to the pain.
In theory, a customer could exit a contract without penalty if they weren’t made aware of potential rises when signing the contract. However, providers were able to get around this by simply saying prices would rise by whatever the consumer price index was at the time, plus a certain percentage.
Therefore, the customer was made aware of a rise – but didn’t know what it would be.
Ofcom’s solution is to require the provider to clearly disclose the rises to avoid a situation in which customers do not know how much they will be expected to pay during their contract term.
The Register asked Ofcom if the change would require existing contracts to be updated but was told, “This will apply to new contracts from 17 January 2025.”
Ofcom has faced calls from Which? and Uswitch to make providers commit to clearer pricing at the contract’s start. Richard Neudegg, director of regulation at Uswitch, said, “After years of campaigning for an end to unpredictable inflation-linked mid-contract price rises with no escape for customers, Ofcom’s new rules will bring some much needed clarity and certainty.
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“Finally, broadband and mobile customers will know ahead of time exactly what they will pay for the duration of a contract, making it easier for them to properly manage their finances.”
However, Neudegg expressed disappointment that the rule change would “only apply to new contracts, and only for contracts taken from January 17, 2025. He added, “It is disappointing that Ofcom has chosen to give longer for implementation than originally proposed.
“If you’re currently in a contract with a provider using inflation-linked price increases, you will still be subject to these until you take out a new contract with the new rules in place.” ®
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