UK may ban some mid-contract mobile and broadband price hikes (updated)

Liberty Global

12/12/2023 12:34

(Adds responses from BT in paragraph 8, Virgin Media O2 in 9-10
and TalkTalk in 11-13)
    By Paul Sandle and Sarah Young
       LONDON, Dec 12 (Reuters) - Britain's telecoms regulator
proposed banning inflation-linked price rises in the middle of
customers' broadband and mobile contracts, saying the practice
was unfair on consumers and hampering competition.
    Shares in London-listed telecoms companies BT  BT.L  and
Vodafone  VOD.L  fell 4% and 2% respectively on the proposed
ban, as they would no longer be able to impose such extra
charges, putting them on the hook to absorb inflationary risks. 
    Regulator Ofcom, which launched a review in February, said
it wanted any future price rises to be written into a contract
in pounds and pence, giving consumers more certainty over what
they will pay.
    Telecoms companies have included inflation-plus price rises
in their contracts to cover increased costs, such as a trebling
in energy bills, and investment in networks.
    The contract terms received scant attention when inflation
was low, but a sharp rise in 2022 to a peak above 11% resulted
in consumers facing hikes in bills of around 14% earlier this
year from providers including market leader BT.
    Both broadband and mobile providers have tagged the extra
charges onto contracts, with Ofcom saying half of mobile
contracts were now subject to inflation-linked price rises,
while for broadband customers it was four in ten.
    "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.
    BT said it had always followed the regulator's guidance on
pricing. It said it was assessing its options.
    A Virgin Media O2 spokesperson said: "We have always been
clear and transparent with our customers regarding any price
changes and provide excellent value for connectivity that is
used almost constantly."
    It said it would make clear its view on how Ofcom could
maintain the competitive environment that already existed for
consumers, while also supporting the billions of pounds of
investment operators like Virgin Media O2 make in telecoms
infrastructure each year.
    TalkTalk, a value provider that uses BT's Openreach network,
said it had delivered value for customers in the "vibrantly
competitive UK broadband market" for 20 years.
    "If Ofcom is to push ahead with tying industry's hands on
CPI indexed price inflation, we urge them to urgently review
similar CPI inflation for BT Openreach at a wholesale level,"
Chief Executive Tristia Harrison said.
    "The link between the two is obvious, is essential for
protecting both consumers and competition, and needs
addressing."
    Ofcom said it would consult before publishing its final
decision in spring 2024.

 (Reporting by Paul Sandle and Sarah Young
Editing by James Davey and Mark Potter)
 ((sarah.young@thomsonreuters.com; +44 20 7542 1109; Reuters
Messaging: sarah.young.thomsonreuters@reuters.net))