Posted 12 December 2023
Ofcom plans to force phone and TV firms to set out contract prices
Ofcom plans to force phone and TV firms to set out contract prices in full, this comes as Mobile Phone Firms face a 3bn legal claim for overcharging.
Phone, TV and broadband customers must be told about any mid-contract price rises at the point of sale and "in pounds and pence" under new plans.
Telecoms regulator Ofcom said it was concerned contracts were not providing "sufficient certainty" to customers due to many firms including mid-contract price hikes linked to inflation.
The move comes following a review by the regulator in February. Millions of customers have been hit by bill increases due to high inflation.
Companies often set out in contracts that monthly charges will go up in line with inflation, which is the rate overall prices are rising across the economy.
But high rates of inflation over the course of the past year have led to customers being charged much higher amounts than in previous years.
Ofcom said price practices by telecoms companies, which involves providers imposing an annual rise linked to the rate of inflation, plus an additional hike of 3.9% typically, had become "significantly more widespread" and were "undermining customers' understanding of what they will pay".
It has proposed that businesses outline clearly what payments will increase by during the course of a contract at the point of sale, rather than including an "uncertain future" inflation-linked, or percentage-based, price rise terms.
'Prices need to be crystal clear'
Dame Melanie Dawes, Ofcom's chief executive, said the majority of people were "left confused by the sheer complexity" of current in-contract price rises written into deals.
"At a time when household finances are under serious strain, customers need prices to be crystal clear," she added.
Virgin Media, which recently merged with O2, was the latest company to introduce inflation-linked price rises in May, according to the regulator. The company hiked prices in step with the Retail Prices Index (RPI) measure of inflation which was 11.3% at the time, as well as an additional 3.9%.
In March, Tesco increased its charges by 10.1%, the Consumer Prices Index (CPI) inflation measure back then, plus the 3.9% additional rise.
Ofcom said it received more than 800 complaints related to contract price increases between January and October - almost double the amount received during the same period in 2021.
It said customers found it difficult to understand the impact of inflation-linked rises on their payments and did not know what the RPI and CPI inflation rates measure.
"We have provisionally concluded that inflation-linked mid-contract price rise terms can cause substantial amounts of consumer harm by complicating the process of shopping for a deal, limiting consumer engagement, and making competition less effective as a result," Ofcom said.
"These terms also require customers to unfairly assume the risk and burden of financial uncertainty from inflation, with tangible impacts on their ability to manage costs at a time when household budgets are already stretched to the limit."
Also, worth a readNetworks To Increase Mid Contract Prices Come April thanks
When will OFCOM hold it's review?
The regulator is will hold consult on its proposals until 13 February and plan to publish its final decision in spring 2024.
What is Ofcom?
Ofcom is the regulator for the communications services that we use and rely on each day.
We make sure people get the best from their broadband, home phone and mobile services, as well as keeping an eye on TV and radio.
Source
Phone, TV and broadband customers must be told about any mid-contract price rises at the point of sale and "in pounds and pence" under new plans.
Telecoms regulator Ofcom said it was concerned contracts were not providing "sufficient certainty" to customers due to many firms including mid-contract price hikes linked to inflation.
The move comes following a review by the regulator in February. Millions of customers have been hit by bill increases due to high inflation.
Companies often set out in contracts that monthly charges will go up in line with inflation, which is the rate overall prices are rising across the economy.
But high rates of inflation over the course of the past year have led to customers being charged much higher amounts than in previous years.
Ofcom said price practices by telecoms companies, which involves providers imposing an annual rise linked to the rate of inflation, plus an additional hike of 3.9% typically, had become "significantly more widespread" and were "undermining customers' understanding of what they will pay".
It has proposed that businesses outline clearly what payments will increase by during the course of a contract at the point of sale, rather than including an "uncertain future" inflation-linked, or percentage-based, price rise terms.
'Prices need to be crystal clear'
Dame Melanie Dawes, Ofcom's chief executive, said the majority of people were "left confused by the sheer complexity" of current in-contract price rises written into deals.
"At a time when household finances are under serious strain, customers need prices to be crystal clear," she added.
Virgin Media, which recently merged with O2, was the latest company to introduce inflation-linked price rises in May, according to the regulator. The company hiked prices in step with the Retail Prices Index (RPI) measure of inflation which was 11.3% at the time, as well as an additional 3.9%.
In March, Tesco increased its charges by 10.1%, the Consumer Prices Index (CPI) inflation measure back then, plus the 3.9% additional rise.
Ofcom said it received more than 800 complaints related to contract price increases between January and October - almost double the amount received during the same period in 2021.
It said customers found it difficult to understand the impact of inflation-linked rises on their payments and did not know what the RPI and CPI inflation rates measure.
"We have provisionally concluded that inflation-linked mid-contract price rise terms can cause substantial amounts of consumer harm by complicating the process of shopping for a deal, limiting consumer engagement, and making competition less effective as a result," Ofcom said.
"These terms also require customers to unfairly assume the risk and burden of financial uncertainty from inflation, with tangible impacts on their ability to manage costs at a time when household budgets are already stretched to the limit."
Also, worth a readNetworks To Increase Mid Contract Prices Come April thanks
When will OFCOM hold it's review?
The regulator is will hold consult on its proposals until 13 February and plan to publish its final decision in spring 2024.
What is Ofcom?
Ofcom is the regulator for the communications services that we use and rely on each day.
We make sure people get the best from their broadband, home phone and mobile services, as well as keeping an eye on TV and radio.
Source
Community Updates
57 Comments
sorted byAll this will do is see providers stack the price from the word go to account for future changes and as pointed out elsewhere the changes to the insurance market worked out so well. Didn’t they?
Just another licence to fleece the public....
If you agree, write to ofcom and tell them. It only took 800 complaints to get them to start the investigation.
Want to account for future costs? Factor it in your headline price. It discourages ludicrously long contracts as well.
This new rule is an improvement, but should be simplified to a base price. that can't be changed in the contract.
It's why I've gone sim only and buy the phone outright. Borderline scammers.
Really wanted to stay this way but here where I am at
Looking for a 256Gb s23 from a retailer that is also eligible for the £100 + Fe buds from Samsung.
Taking s23 256Gb on 24m Vodafone contract total cost is £843 or assuming two 9% price increases £905. I can trade in a spare ancient phone for £6 plus a bonus £100. So that's 799.
My SIM only costs 10pm so £240 hence I need to find a brand new s23 256Gb for less than £559 SIM free after phone trade in from an eligible retailer. Let's just say I am struggling to get anywhere that and hence going in contract even with the ridiculous price increases is looking the best option (edited)
Percentage increases will suffer or if this rule will cover existing contracts too..
Ultimately minimum term service contracts are sold to provide certainty to the service provider in terms of revenue. They used to provide certainty of cost to the consumer but more and more businesses have chipped away at that with these clauses.
They do it so they can provide a cheaper headline price and thus make price comparisons difficult.
Virgin for example now state increases will be RPI+3.9%. But if RPI is negative then they don’t take it into account and stick with 3.9%. Calls into question the argument the increase is solely to account for increases in costs.
And ofcourse most service providers can choose to end the contract arbitrarily in their terms. So if costs are too high down the line they aren’t stuck making a loss as they would claim. They don’t need these price increase clauses to protect themselves, they just have them to charge more down the line. (edited)
Thats all whilst acting in our best interest against the “big conglomerates
Off? Nobody forced your dad into the contract.
I try to specifically pick suppliers like Zen, A&A and Spitfire who don't pull this kind of nonsense.