Ofcom plans ban on inflation-linked mobile and broadband contracts

Mobile phone providers could be banned from linking price rises to runaway inflation figures under new proposals from the regulator.

Ofcom said new contracts would need to state pound and pence rises rather than, as many do now, say that increases will be “inflation plus 3.9%”, for example.

The regulator said mobile and broadband customers were being hit with mid-contract rises which they found difficult to understand.

More than half of mobile customers and around four in 10 broadband customers were on inflation-linked contracts in April this year, Ofcom’s analysis discovered.

Survey

Yet a survey for the regulator found customers of these providers had very little knowledge of the details.

It said that only 16% of these broadband customers and 12% of mobile customers knew that their costs could rise, and that any increase would be linked to inflation with an additional percentage added on top.

Inflation – which is a rough measure of how quickly the prices of things that average people buy are rising – has run rampant over the last two years.

One inflation measure, Consumer Price Inflation (CPI), peaked at 11.1% in October last year. That means that between November 2021 and October 2022 the prices of what the average Briton bought rose on average by 11.1%.

For many mobile and broadband customers this has greatly increased their monthly payments.

In an example provided by Ofcom to demonstrate the new rules, it said a previous advert saying that a plan cost £30 initially but would rise by CPI plus 3.9% would have to change.

The new advert on a provider’s website would read: “Monthly subscription price: £30.00 until March 31, 2024. Increasing to £31.50 on April 1, 2024 and £33.00 on April 1, 2025.

Household finances

Ofcom chief executive Dame Melanie Dawes said: “At a time when household finances are under serious strain, customers need prices to be crystal clear.

“But most people are left confused by the sheer complexity and unpredictability of inflation-linked price rise terms written into their contract, which undermines customers’ ability to shop around.

“Our tougher protections would ban this practice once and for all, giving customers the clarity and certainty they need to secure the best deal for their needs and budget.”

Matthew Upton, acting executive director of policy and advocacy at Citizens Advice, said: “Banning inflation-linked, mid-contract price rises is a much-needed move from Ofcom.

“Every day our advisers hear from people whose budgets are pushed to the limit. It’s so much harder to manage your money with unpredictable mid-contract surges in the mix.

“But these proposals still leave the door open to providers putting ‘prices may vary’ small print in their contracts. While consumers can technically leave penalty free, we know that this is not the reality.”