Labour says it will take action on broadband social tariffs and price rises

The annual price rises used to be annoying in the broadband world but with so many now in contracts where the price rise is determined as the rate of inflation plus several percentage points the following year of price rises are set to be very unpopular in households across the UK.

The Labour Party has set out its policy on broadband tariffs that it would implement if it won the next General Election. While in theory the next General Election is a couple of years away but it could be much sooner and with a large lead in the polls this policy has a real chance of becoming fact. 

The shadow secretary for digital, culture, media and sport Lucy Powell has set out the policy in The Guardian and to summarise it into short points:

• Make it a requirement for broadband retailers to offer a social tariff and legislation to enforce its availability
• Changes to broadband contract rules so that mid contract price rises are not allowed
• Reduction of early termination charges
• Ensure wholesale price rises are cost based rather than CPI based

Internet access is a necessity not a luxury, yet the economic crisis made in Downing Street is making it increasingly difficult for families to make ends meet and stay connected.

Our 3 point plan will ease the broadband bombshell facing families and firms, at a time when they are already facing eye watering energy bills, and mortgage and rent increases. Whilst the Conservatives crash our economy, Labour will ensure accessing and connecting to digital infrastructure powers growth across our economy to ensure people and places aren’t left behind.

Lucy Powell MP

The issue around wholesale pricing we believe is referring to the CPI formula that Ofcom and Openreach are working to for the 2021 to 2026 period, and with inflation running in the double digits once other cost increases are added in the retail chain there is the possibility that broadband bills could go up by a quarter (the Openreach forumla is CPI+0% which is something we highlighted in the last couple of weeks). As Ofcom currently just manages the wholesale costs for Openreach due to its dominant position this would have no effect on Virgin Media or CityFibre but that might change if they don’t read the room and act accordingly at the time.

The lack of promotion of social tariffs and criticism for those not promoting them features and we are doing our bit by adding them to our package listings as we learn about the different tariffs.

Ahead of a Labour Government it is worth saying that for alt-net FTTP operators getting customers on-board even if via a very low cost social tariff means that when a households budget allows they will stay with the same network and upgrade to something with higher speeds.   

This policy means a shift from light touch regulation to one of that is more pro-active and protective of the consumer. For the Labour Party it also indicates that the previous nationalisation of parts of BT and free broadband for all is not going to appear in the manifesto. At the time of the General Election the UK broadband market was already changing in terms of being much more than BT and Openreach and it looks like three years later the amount of investment and building work has been recognised.

Update 9:35am The text of the policy has just landed in our inbox so to ensure our readers can see the raw text we are including the key points:

Labour is calling for:

1. A reversal of changes the government made in 2019 which allowed regulated wholesale prices to rise with CPI rather than costs, so that telecoms wholesalers and internet service providers don’t get a windfall from sky high inflation whilst families and firms struggle to pay their bills.
2. Ofcom to investigate and take action to strengthen consumer protections including taking action on mid contract price rises, early termination costs for social tariff customers, and loyalty penalties where long term customers pay more than new customers.
3. An industry wide social tariff for low income families. Industry including wholesalers like Openreach, must work with Ofcom and consumer groups to develop a mandatory well-advertised broadband social tariff for low-income families, or the Party will set and legislate for one in government.