Ofcom confirms ban on inflation linked price rises starts in January 2025 UPDATED

We’ve seen numerous large providers such as BT, EE, Plusnet and Vodafone move towards simpler pounds and pence price rises, eskewing the more complex CPI+3.9% type arrangements. Now all the other broadband and mobile providers who have an inflation linked or % price rise baked into broadband contracts have an Ofcom deadline of 17th January 2025 for when they should use simple £/p price rises.

IMPORTANT The change only applies to new contracts, so if joining an ISP or recontracting. So if you signed up in February 2024 to a CPI+3.9% formula you will still see prices rise by that, but based on the most common £3 per month announced those on the CPI formula may see a smaller price rise.

What we found

More than half of broadband customers (55%) and pay monthly mobile customers (58%) do not know what inflation rates such as CPI and RPI measure. And of those who are with providers that use inflation-linked price rises, very few broadband customers (16%) or mobile customers (12%) were both aware of the price rise and able to identify that it was inflation-linked with an additional percentage.

We also found that, even when people do consider future inflation-linked price rises when choosing a contract, they often do not understand them fully and find it difficult to estimate what the impact could be on their payments.

Tougher new rules from January

From 17 January 2025, phone, broadband and pay TV providers will be prohibited from including inflation-linked, or percentage-based, price rise terms in all new contracts. This means consumers will be able to enter into contracts featuring £/p information ahead of annual price rises in 2025.

Some providers require this time to make the necessary changes to their processes and business plans. However, other providers will be able to do it sooner, and don’t have to wait for the deadline. Indeed, BT and Vodafone have already changed their pricing practices in response to our consultation.

Ofcom on banning CPI/% based price rises mid contract

While this is a positive move in theory the reality is that with mobile and broadband providers not having certainty about their input prices those that have adopted the new simpler formula have actually adopted a formula that is more expensive to the public than in the past. We covered this the other day when Plusnet picked a £3 per month annual price rise. 

There is no sign that Ofcom is going to investigate banning mid-contract price rises from mobile and broadband contracts, the announcement of the deadline doubles down on competition mantra that has driven telecoms regulation for several decades.

Competition helps keep prices down

Over the last five years, average prices for broadband and mobile services in the UK have fallen in real terms. At the same time, companies have been investing in upgrading their networks, with availability of full fibre increasing tenfold and average speeds and data use doubling.

This is a result of the UK’s competitive telecoms markets, in which providers set their own prices. Customers can choose from a range of different types of packages, and several providers offer fixed price contracts.

Ofcom’s job is to make sure consumers can shop around with confidence and take advantage of this. Under our current rules – which we strengthened in 2022 – providers that specify price rises in contracts from the start must make this clear before customers sign up. If they don’t, they must give customers one month’s notice and the right to exit penalty-free when they increase prices mid-contract.

Ofcom on price competition in telecoms

Alt-nets who are the full fibre providers most likely to not have in contract price rises are available to around 35.8% of the UK. The full fibre retailers using the Openreach network and also the Virgin Media O2 DOCSIS 3.1 and nexfibre XGS-PON networks generally have in-contract price rises, but you can find retailers such as Zen Internet who promise no-in contract price rises on their 18 month contracts.

Another tactic and its not fool proof but worth trying if in the last month of your contract term with a provider is to see what price they will offer if you sign up to a new 12/18 or 24 month contract. In some cases this can be cheaper than your existing contract, even after allowing for a couple of price rise cycles. The downside is you are tied into a contract again.

We’ve seen some suggestions that the £3 per month price rises are the maximum a provider will charge and that if costs are not rising by anywhere close to that much they may put the price up by less. Unless we have missed something in the Ofcom paperwork, everything points to the £3 being baked in on the day you sign the contract. 

Update 1:15pm A couple of statements from providers:

Having campaigned against unpredictable mid-contract price hikes for over two years, and with the cost of living still hitting people hard, we are delighted to see Ofcom take a firm stance on the issue. This is a huge step towards a fairer, more transparent broadband market, which will help to protect millions of customers from unknowingly being locked into contracts that surprise them with an unavoidable price rise after a few months. Hyperoptic prides itself on being in the corner of customers, offering hyper fair and transparent contracts with no mid-contract price hikes.

Dana Tobak, CEO Hyperoptic

This ban from Ofcom is long overdue, and we welcome the move, however at Cuckoo we’ve taken this one step further. Yes, bringing more transparency to these increases is key to avoid consumer confusion, but at Cuckoo we’ve never raised prices mid-contract.

Mid-contract price rises are a tactic that the big six broadband providers have been using for years, leaving customers confused and shortchanged.

Major providers are still squeezing consumers unfairly. While a number of brands have moved to comply ahead of the Ofcom guidance by clearly communicating their mid contract price rises in ‘pounds and pence’, at the end of the day they are still raising prices mid-contract, and these increases will differ depending on who your provider is

Imagine you buy a ticket for a football match, but then at halftime you’re told you’ll have to pay more to watch the second-half – and then you’re fined if you want to leave.

As an industry broadband needs to be more transparent, more customer focused and fairer. It’s something we’re striving to do at Cuckoo. Today’s Ofcom ban is a welcome step in the right direction, but mid-contract price rises are bad full-stop.

Sarah Howells, Managing Director at Cuckoo