Question of the FortnightQuestion of the Fortnight
10
THE FACTS
- Broadband firm Hyperoptic
has asked Ofcom to
investigate bigger firms
imposing price rises above
the rate of inflation - It has also launched
a petition calling for
customers to switch
providers without penalty
when faced with an “unfair”
price hike - Most providers have
increased their monthly bills
by 10 per cent
One provider wants to stop its bigger rivals clobbering you every year
Will Ofcom ban above-inflation
broadband price rises?
A
n inevitable problem
with any industry
regulation is that the
companies it affects will
always look for ways around
it, leading to unintended
consequences that harm the
very people the rules are
supposed to help: customers.
That’s one of the
explanations behind the
record increases in broadband
bills this year. In 2016 Ofcom
ruled that if internet service
providers (ISPs) unexpectedly
raised prices mid-contract,
they had to allow customers
to cancel without paying an
early-termination fee.
ISPs responded by building
above-inflation increases into
customer contracts, protecting
them from mass cancellations
when prices rose.
This didn’t seem like
anything to worry about while
inflation was at historically
low levels. But with prices
rising at the fastest rate since
the early 1990s, customers
have been hit by the biggest
ever increases to their bills.
BT for example has
increased prices by 9.3 per
cent, a figure calculated by
adding 3.9 per cent to 5.4 per
cent, which was the
Consumer Price Index (CPI)
rate of inflation in January. It
rose to seven per cent in April,
and is expected to climb
further, meaning next year’s
bills are likely to be even
higher.
As hard-up customers
wonder how they’ll afford
these bills, ISP Hyperoptic has
written to Ofcom asking it to
“investigate” above-inflation
price rises, and to “allowimpacted customers to
terminate their agreement and
switch providers,
penalty-free” (see http://www.
snipca.com/41633).
Hyperoptic, which supplies
around 810,000 homes in the
UK, also wants ISPs to state
price rises more prominently
on their websites, so
customers feel better
informed about what they’ll
end up paying. It conducted a
“nationally representative”
survey of more than 2,
customers in which 60 per
cent said they weren’t aware
their bills would increase
during their contract. Nearly
half say they feel misled,
and wouldn’t have signed
their contract if they had
been aware.
The company says that firmsbury details of increases in the
“small print” of contracts,
ignoring Ofcom’s rule that
they “must set out price rises
clearly before customers sign
up”.
The regulator tells
customers that if an ISP fails
to do this, they can report it
and then escalate the case to
an independent ombudsman.
Also, in June it’s introducing
rules that force companies to
send customers a summary
of the main terms of their
contract in writing before
they sign up – including “an
example of how any planned
inflation increases will affect
the price they pay”.
As part of its campaign,
Hyperoptic has set up a
‘Free to switch’ petition
(www.snipca.com/41635),though it would be wrong to
overlook the commercial
motivation behind such
tactics. The company is one of
the biggest ‘alt nets’
(alternative networks): young,
fast-growing firms keen to
take on the big beasts of BT,
Sky, Virgin and TalkTalk. It
suits Hyperoptic’s public
image to market itself as being
on the side of the ordinary
person, but its own small
print says it can “change
prices for the Services at any
time” (see paragraph 9.6 at
http://www.snipca.com/41634).
It’s thought that Ofcom has
agreed to meet Hyperoptic to
discuss its complaint, but it’s
unlikely to change the rules
any time soon.
Bigger firms say they need
to raise prices above inflation
in order to fund full-fibre
networks. The irony is that
more customers may end up
downgrading to slower,
cheaper packages in order to
afford any kind of broadband
connection.Nearly half of customers feel
misled, and wouldn’t have signed
their contract if they had been
aware of price rises
27 April – 10 May 2022 • Issue 630