UK comms watchdog banning inflation-linked mid-contract price rises
- Reference: 1721388160
- News link: https://www.theregister.co.uk/2024/07/19/ofcom_inflationlinked_midcontract_price_rises/
- Source link:
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.
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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."
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Ofcom [4]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.
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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."
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Ofcom [7]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, [8]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.
[9]HP CEO: Printed pages are down 20% since pandemic
[10]Europe buying more Chinese phone brands as market starts to bounce back
[11]Microsoft hikes Dynamics 365 prices by around ten percent or more
[12]Nominet to restructure, slash jobs after losing 'major deal'
"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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[4] https://www.theregister.com/2023/12/12/ofcom_takes_aim_at_inflation_contract_terms/
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[7] https://www.theregister.com/2023/11/03/which_uswitch_telco_hikes/
[8] https://www.uswitch.com/media-centre/2024/07/Ofcom-mid-contract-price-rises/
[9] https://www.theregister.com/2024/06/07/hp_ceo_printed_pages/
[10] https://www.theregister.com/2024/05/23/chinese_phone_brands_smartphone_ships/
[11] https://www.theregister.com/2024/04/15/dynamics_365_price_rises/
[12] https://www.theregister.com/2024/03/21/nominet_set_for_job_losses/
[13] https://whitepapers.theregister.com/
Re: Ofcom: The chocolate teapot of regulators
Agreed the whole point to signing up for a fixed term contract is to get a better deal that just paying as you go on a monthly basis, but having them tell you it will be £25 pm until April when it could be whatever amount makes you wonder what actual benefit you are getting from being in a contract in the first place?
Just ban all mid term contract rises.
I do hate when Inflation is cited as the cause for an increase in costs. The increase in costs IS the inflation.
Now, sure, the root of inflation is essentially how much and the price of oil one needs to import to operate; but what does that tell you about what actions are needed to keep costs under control...
"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."
Finally?? Knowing exactly what you would pay was the case for decades, before the utter cnut telco operators decided they could gouge customers for another few quid just after Covid.
It wasn't Covid - that just made the amounts more obvious by driving up the inflation rate.
Mid contract rises came in about 10 years ago when 24 month contracts became the norm.
And those were introduced because handset prices had risen to a level that couldn't be written off over the course of a 12 month contract.
So basically it's Apple's fault. As usual :-P
Not quite accurate article.
It was way more insidious than this.
It was rarely "Price will increase by inflation", but rather "Price will increase by inflation PLUS 3.5%"
So potentially anywhere say between 5% and 12%. That's a much bigger increase than just inflation.
Better to leave them to it and let them put up their prices as much as they want and, instead, introduce a gouging-bastards-profiteering tax. When they put the prices up then they have to demonstrate the need for the increase based on operating cost increases and/or investment + reasonable profit. Not C-suite bonuses. Not shareholder dividentds. Not buying their own shares back to trigger bonuses. If they can't demonstrate this then it's classed as greedy-bastard profiteering and it's taxed at 200%.
That's never going to happen: It would highlight how much customers are paying for the Government's arbitrary decision to ban certain vendors.
Prospects
There's always a way round consumer protection. I anticipate a move to monthly contracts at monthly specified prices.
About bloody time the regulator did something
This is pure greed. Up until two months ago (when I changed to fibre, different contract), what I was paying for my internet/landline/mobile was a lot (via Orange France) but the price hadn't changed in a decade or so. Instead, every so often I'd get a message saying my offer had increased. I started with 3G and 500MB/month mobile data, and finished with 5G (not that there's any such thing around these parts) and 200GB/month.
All of the "prices will rise by inflation plus X%" (I hear this read out very quickly at the end of radio adverts) is simply because people accept it rather than saying piss off like they should.
Hmm
I wonder if contracts will get shorter as inflation isnt under the control of these companies but they would be expected to shell out a wage increase because of inflation. God help them if they were to try for a 'living wage'
Ofcom: The chocolate teapot of regulators
The obvious, and clearly needed mandate was for suppliers to offer fixed prices when they have a fixed/minimum term. Companies can then offer a fixed price that includes any additional inflation linked costs (like they always used to).
Lord alone knows why Ofcom think it reasonable to have contract terms that say "and this time next year we'll put your contract up by an arbitrary £6 a month, and that's because we can, and is linked to nothing".