In a move aimed at protecting consumers from financial uncertainty, Ofcom has announced new regulations that will overhaul how price increases are communicated in telecoms contracts. Starting from January 2025, any price rise written into phone, broadband, and pay TV contracts must be clearly stated in pounds and pence, and providers must transparently disclose when these changes will occur.
A response to inflation-linked pricing
In recent years, many major UK telecoms providers have included terms in their contracts that link price increases to future inflation rates.
Ofcom’s decision to ban this practice stems from concerns that linking price rises to inflation rates does not provide consumers with sufficient clarity about their financial commitments. The new rules will require that any potential price changes be clearly outlined. Additionally, providers will need to specify the timing of any price adjustments, ensuring that customers are fully informed before committing to a contract.
Cristina Luna-Esteban, Ofcom’s telecoms policy director, emphasised the importance of this change. “With household budgets squeezed, people need to have certainty about their monthly outgoings. But that’s impossible if you’re tied into a contract where the price could change based on something as hard to predict as future inflation,” she 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.”
Impact on consumers and market competition
The UK’s competitive telecoms market has seen average prices for broadband and mobile services fall in real terms over the past five years. Providers have invested heavily in network upgrades, with significant improvements in full fibre availability and increased average speeds and data use. Despite this, the inclusion of inflation-linked price rises in contracts has created confusion and uncertainty for consumers.
Ofcom’s current regulations, strengthened in 2022, require providers to make price rise terms clear before customers sign up. If providers wish to increase prices mid-contract, they must give customers one month’s notice and allow them to exit the contract without penalty. However, the new rules will address the core issue of inflation-linked pricing, which has been increasingly prevalent in recent contracts.
Review and findings
Ofcom’s review revealed that around 60% of broadband and mobile customers were on contracts with inflation-linked price rises as of April 2024. Consumer research indicated that many customers do not fully understand inflation rates or the impact of inflation-linked price rises. Over half of broadband customers and pay-monthly mobile customers were unaware of how inflation measures, such as CPI and RPI, affect their bills.
The review found that while some customers consider inflation-linked rises when choosing a contract, they often struggle to estimate the financial impact of such terms. Ofcom’s decision to ban these practices from January 2025 is intended to simplify pricing and enhance transparency for consumers.
The new regulations will come into effect on 17 January 2025, prohibiting the inclusion of inflation-linked or percentage-based price rise terms in new contracts. Providers will be required to adopt these changes, although some may implement them sooner. Notably, companies like BT and Vodafone have already adjusted their pricing practices in response to Ofcom’s consultation.
