Broadband firms have been urged to drop penalties for customers leaving mid-contract amid concerns of impending “exorbitant” price rises or exit fees of more than £200.
Millions of broadband and mobile phone customers can expect to face monthly bill increases of at least 14% from April.
Providers often link their annual price rises to January’s consumer price index (CPI) or the retail price index (RPI). Despite a slight easing this month, both are near the highest they’ve been for 40 years, with the latest CPI at 10.5% and RPI at 13.4%.
BT, EE, Plusnet and Vodafone broadband contracts allow prices to go up by CPI plus 3.9%. At TalkTalk, it is CPI plus 3.7%, while Shell Energy can add CPI plus 3%. Sky and Virgin Media contracts allow mid-contract price increases but they do not stipulate a pricing formula in the same way as rivals.
BT has confirmed an increase this year of 14.4% – CPI of 10.5% plus 3.9%.
Which? warned that given many customers saw their broadband bills increase by nearly 10% last year, this is “another blow” for those looking to keep spiralling costs under control.
Ofcom rules state that telecoms providers must offer their customers the right to exit their contract penalty-free if they are subject to unexpected price rises which are not provided for in their contract.
But because mid-contract price rises are written into the terms and conditions of some people’s contracts, Ofcom’s rule is that in those cases the customer does not have the right to exit penalty-free – meaning they have no choice but to accept the new higher price or pay an exit fee to terminate their contract.
However, the rules do require the relevant terms to be set out prominently and transparently, at the point of sale. Ofcom is currently investigating whether in-contract price rises were set out clearly enough by phone and broadband companies before customers signed up.
Which? is calling on all providers to “carefully assess what level of mid-contract price rises can be justified in the current economic climate”.
Rocio Concha, Which? director of policy and advocacy, said: “It’s hugely concerning that many broadband customers could find themselves trapped in a lose-lose situation where they either have to accept exorbitant – and difficult to justify – mid-contract price hikes this spring or pay costly exit fees to leave their contract early and find a better deal.
“Which? is calling on providers to let their customers leave without penalty if they face mid-contract price hikes. Providers should also carefully consider the level of any price rises when many consumers are already under huge financial pressure.
“With many households struggling to make ends meet, it is completely unfair that people are trapped in this situation. Telecoms providers need to step up and play their part to support their customers through the cost-of-living crisis.”
An Ofcom spokesman said: “While Ofcom doesn’t set retail prices, companies must treat customers fairly – particularly during an exceptional period of hardship for many households.
“Our rules are clear: everyone must be told upfront about any future price rises before they sign up, and we’re investigating whether phone and broadband firms are sticking to this.
“Customers can already exit penalty-free if their provider didn’t specify a price rise in their contract, or didn’t make it clear when they signed up. If you don’t think your provider’s played by the rules, you should complain to them first and escalate to the independent ombudsman if necessary, who can make a judgment on your case.”
A spokesman for BT Consumer, covering BT, EE and Plusnet, said: “With the December 2022 CPI rate now announced, we can confirm our price change will be going ahead on March 31.
“We expect the average customer will see their price rise around £1 per week. This price rise doesn’t apply to all our customers. Over three million customers across our BT Home Essentials, EE Mobile Basics, PAYG, BT Basic, landline-only and Home Phone Saver will have their prices frozen through 2023.
“Although telecoms bills remain a small fraction of total average household spend, we know that everything adds up. We take seriously our responsibility to ensure our services are accessible to the widest group of customers possible through our market leading social tariffs.
“Customers who are struggling financially and are eligible for Home Essentials can move penalty-free at any point in their contract, this also includes EE and Plusnet customers.
“We are balancing our own rising costs due to high inflation and making vital digital infrastructure investments for the UK.”