The UK’s biggest telecoms providers, including BT, EE, Vodafone, Virgin Media O2 and TalkTalk, have announced that they will increase broadband and mobile bills by almost £500m from next spring, adding to the cost of living crisis for millions of customers.
The providers will increase bills by using either the consumer price index (CPI) or retail prices index (RPI) measures of inflation, and then adding almost four more percentage points on top of the official rate. The practice, which is not allowed in other utility sectors such as electricity and gas, involves increasing bills during the contract period, regardless of the initial price agreed by the customer.
The providers claim that the price rises are necessary to cover the costs of network investment, inflation and regulatory changes. The price rises will affect more than 22 million broadband and mobile phone customers, who will see their bills increase from April and May next year. The price rises will vary depending on the provider and the type of contract, but some customers could see their bills increase by up to £36 a year.
The price rises will come amid a cost of living crisis, caused by a combination of factors such as low wind output, high gas prices, reduced gas supplies from Russia, and increased demand due to the economic recovery from the pandemic. The price rises will also come after the government has cut the universal credit uplift by £20 a week, and has failed to extend the £400 energy rebate that was given to all homes last winter.
The price rises have been criticized by consumer groups, campaigners and MPs, who have called for a ban on mid-contract price hikes, as they are unfair and unpredictable for customers. The consumer group Which? and Citizens Advice have written to the telecoms regulator, Ofcom, calling for a ban on mid-contract price rises as part of its review of the practice that it launched in February.
The consumer group Which? has estimated that telecoms firms will generate £488m from the 2024 mid-contract price rises, based on Bank of England and Office for Budget Responsibility forecasts of inflation for December. The consumer group Which? has also found that around a third of mobile and broadband customers do not know whether their provider can increase their price, and among those who do know, around half do not know how this would be calculated.
The consumer group Which? has also suggested that customers should check their contracts and switch to a cheaper deal if they are unhappy with the price rises, as some providers may allow customers to leave penalty-free within 30 days of receiving a price rise notification. The consumer group Which? has also supported the idea of a social tariff, a discounted rate for low-income and vulnerable households, funded by taxation or by spreading the subsidy cost across better-off bill payers, which could save households up to £400 a year.
The consumer group Which? has also joined a coalition of 140 organizations and MPs, which has written an open letter to the chancellor, Rishi Sunak, calling for a social tariff to be introduced when the government support ends next year. The consumer group Which? has also mentioned that some energy suppliers, such as Octopus Energy, E.ON, and EDF, have supported the idea of a social tariff, and have offered their discounts to some customers.
