Households are set to shell out more money for their phone and broadband, despite a ban on mid-contract price hikes coming into effect last week.
Last summer, regulator Ofcom ruled that phone, broadband and pay TV providers were banned from inflation-linked, or percentage-based, price rise terms in all new contracts.
Ofcom said that previous rules meant that customers were left ‘without sufficient certainty and clarity about the prices they will pay’.
From this month, providers must tell their customers how much any price rises will be in pounds and pence in a prominent way, and when any changes to prices will occur.
The new rules apply to consumers on contracts signed after 17 January.
On the surface, the rules could protect consumers but – as This is Money has warned since last summer – it will not protect from blanket price increases.
Instead, consumers could face internet and phone costs rising by up to 15 per cent as the regulator only requires price increases are clearly communicated.
Botched shake-up: Ofcom’s new rules will lead to price hikes, experts have warned
Last August, we warned that because Ofcom was not imposing a cap on how much firms were allowed to charge meaning they could, in theory push prices even higher.
Broadband comparison site Broadband Genie has now warned further and said the implementation of tougher regulations will prompt broadband providers to hike prices across the board.
Peter Ames, spokesman for the site said: ‘It is disappointing to see that some providers have used Ofcom’s regulation to display price rises in pounds and pence as an opportunity to make price rises even higher.
‘Plusnet’s £3 price, for example, is a 12 per cent increase for customers on its cheapest packages.
‘Similarly, Virgin Media’s cheapest and most popular package costs around £23 per month. So its £3.50 price rise represents a staggering increase of 15 per cent.
‘This is higher than the price rise we saw in 2023, at the height of inflation.’
This Is Money warned of an effective poll tax on broadband, where everyone pays the same amount regardless of the cost of their mobile phone or broadband deal.
It means that those on cheaper mobile and internet deals face much steeper hikes than those on more expensive ones. And the blame can be primarily left at Ofcom’s door.
‘What we are seeing comes as a direct result of crude regulation that has clearly been ill-thought-out and the implications of it not given enough consideration,’ says Ames.
‘As ever, we believe the only solution is for Ofcom to finally abolish price rises entirely, once and for all. It’s possible for some providers to offer fixed prices, why can’t the ones with the biggest profit margins follow suit?
Andy Aitken, chief executive and co-founder of challenger Honest Mobile, has also called for a total ban on mid-contract rises.
‘They thrive on the lack of clarity, and terms like ‘prices may vary’ are a loophole they can exploit to push unfair increases. It’s like we left the back door wide open.
‘The bottom line? Mid-contract price hikes should be banned outright. There’s no other contract you enter for a fixed term that increases halfway through.
‘It doesn’t happen on your insurance, your mortgage, your energy bill or your car. So why should it happen on your mobile or broadband?’
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