December’s surprise rise in inflation has renewed fears of “completely unacceptable” price rises for millions of broadband customers from April.
Many of the biggest broadband firms – such as BT, EE, Plusnet, Shell Energy, TalkTalk, Virgin Media and Vodafone – raise prices every April in line with the Consumer Price Index (CPI) or the Retail Price Index (RPI) plus an additional 3%, 3.7% or 3.9%.
Wednesday’s announcement that CPI has risen to 4% could see broadband bills increase by 7.9% in April in what will come as unwelcome news for consumers struggling with rising living costs.
Uswitch calculated that the increase could cost the individual consumer around £27.19 more a year for broadband and £24.23 for mobile bills on average.
On Tuesday, BT announced that it would introduce clearer pricing plans for the summer, but would still go ahead with April’s inflation-linked rises.
Customers wanting to avoid these hikes can be charged punitive exit fees to leave their contract early.
Ofcom is currently reviewing inflation-linked, mid-contract price rises but is yet to publish its final decision on its proposals to ban the practice.
Which? director of policy and advocacy Rocio Concha said: “This announcement could trigger a new wave of price hikes from big broadband and mobile providers, just 12 months after many firms imposed price increases of more than 14% on customers.
“It would be completely unacceptable for providers to follow BT and inflict another above inflation increase on customers after Ofcom proposed banning this practice, saying it causes substantial consumer harm.
“Telecoms providers must step up and do the right thing by immediately scrapping any plans to hit their customers with above inflation price hikes this April.”
Which? has argued that it is unfair for consumers to be signed up to deals that do not give them certainty about how much they can expect to pay over the course of their contract, and then face exit fees if they want to leave early.
A survey by the group found that 78% of consumers believe that mid-contract price hikes are always unfair and that people overwhelmingly value pricing certainty for broadband contracts.
Alex Tofts, broadband spokesman at Broadband Genie, said: “Millions of broadband customers across the country got a taste today for what the impending annual price rises will look like when they hit bills in the spring.
“Each provider determines their price increase based on their chosen metric. In recent years, the unpredictable and volatile nature of inflation means broadband customers are in the dark about future price rises before signing up to a contract.
“Ofcom’s announcement last month that it would like to crack down on inflation-linked price hikes has our full backing. The Government also put pressure on providers last year to cancel their price rises, but to no avail.
“As long as this price hike trend persists, providers should grant customers a hassle-free exit, without having to fork out the penalty fees.”
Richard Neudegg, director of regulation at Uswitch.com, said: “There is hope on the horizon, with Ofcom currently weighing up a new ban on inflation-linked and percentage-based price hikes.
“All mobile and broadband customers should check to see if they are in or out of contract, and consider switching to a cheaper deal as soon as they are able to prevent overpaying.
“This is especially true for anyone who hasn’t moved in the past 18 or 24 months as you’re very likely to be at or nearing the end of your contract and significantly cheaper options will be out there.
“According to Ofcom, 26% of broadband customers and 34% of mobile customers are out of contract, so now could be a good time to switch to cheaper deals and offset the April price increases. Even if you still face a price rise elsewhere – you’ll still pay less than if you do nothing.”
Mr Neudegg added: “It’s also worth looking into those who don’t partake in mid-contract price rises, including mobile networks like Giffgaff, Smarty, VOXI, Lycamobile and Lebara, as well as smaller, alternative broadband providers like Hyperoptic and Zen.
“Our own data shows that broadband customers can save an average of £179 a year by switching their provider, while mobile customers at the end of a 24-month handset contract switching to a SIM only contract (and keeping their existing handset) could save as much as £360 per year.”
Zen Internet chief executive Richard Tang said: “Independent research shows that consumers simply dislike this practice, and it leaves a bad taste. Many are unaware this is even written into the small print of their contract.
“While Ofcom is running a consultation on banning telecoms providers from implementing inflation linked mid-contract price rises, any regulation passed won’t be in place until after this year’s increases.
“The reality is that many providers will be introducing price increases to contracted customers once again that are ahead of CPI. With increases of 14% or more last year, plus this increase of 7.9% this year, it amounts to a substantial additional burden to household budgets.”
For the latest personal finance news, follow us on Twitter at @ExpressMoney_.
