Ofcom to end inflation linked price rises

[ITTroll]

I see that Ofcom is proposing to ban inflation linked mid-contract price rises.

https://www.ofcom.org.uk/news-centre/2023/ban-on-inflation-linked-mid-contract-price-rise

This week, some other providers announced their plans ahead of the ruling (due in spring). I wonder when we will hear from TalkTalk.

[ferguson]

LOL, not exactly, no ban on CPI increases in the way you have experienced recently. As you averred yourself, the changes will only apply to new contracts. 

[ITTroll]

So two bans. 😉

[ferguson]

@ITTroll 

They also use the word "both."

[ITTroll]

Well ban is the word Ofcom are using.

1.3 We are proposing to ban telecoms companies from providing for both inflation-linked price rises and price rises that are set out in percentage terms in contracts. Instead, where companies' contracts provide for any price rises during the contract period, they must set this out up-front in pounds and pence.

 The proposal does focus on in-contract inflation linked price rises. So perhaps that does still allow for CPI/percentage increases after the initial commitment period. Also, it does talk about only applying to new contracts, which I guess is the only practical way of making the change.

[ferguson]

Ofcom aren't "banning" the CPI rise as such, rather they are telling providers going forwards to spell out any in-contract increases in precise price terms at the outset, rather than via a formula. How this will effect existing arrangements such as yours, who knows? My fear is that, as ever with Ofcom, the law of unintended consequences will prevail. Like when they effectively allowed providers to pursue this recent nonsense in the first place. 

[ITTroll]

My Fixed Price Plus contract ended this month and today I received my email about the price rise in April. It has gone up by just the CPI of 4% (without any add-on charge). This means the price is still as good as any special deal, except I’m not locked in.

It will be interesting to see what happens in the future if Ofcom do ban the CPI rise.

[ITTroll]

Well it switches from no in contract increases, to only CPI increases when out of contract. But as mentioned previously, it is unclear what will happen once Ofcom make their ruling.

[ferguson]

If you're on a Fixed Price Plus contract then technically that does not finish, save for CPI increases every April. 

[ITTroll]

Well that's exactly how it used to be. Until Ofcom allowed BT Openreach to increase wholesale prices by CPI each year. ISPs then passed that directly on to their customers and added an extra bonus percentage on top of that. Netting them a nice windfall of 14.2% last year and a further 7.7% this April.

TalKTalk used to offer the Fixed Price Plus scheme (which I have finishing soon) but I think they only offer that on their Full Fibre products now.

[ferguson]

What Ofcom should be doing is banning in contract price increases completely. Want to pay a month at a time? The price will be £x, subject to increase at any time, at which point you will be notified and allowed to leave if you wish. Commit to 12 months? The price will be £y, fixed for the term. Similarly for longer contracts. It's not like energy prices for example, which are beyond anybody's control other than the vagaries of the market and wherever the latest war happens to be. The law of unintended consequences will surely come in to play with their current proposals, I am with @AllyM on this one. 

[ITTroll]

I'm guessing Ofcom are hoping this will re-introduce some competition once they have to state it in cold hard pound signs. At the moment the true cost increase is hidden behind known and unknown percentages.

[AllyM]

What I imagine will happen is that ISPs will think up a number larger than what they predict the inflation rate to be in order to cover themselves, so the consumer will pay more in the long run. Ofcom don't care about that as long as it's clear for consumers to see the actual amount they will be paying without having the arduous task of calculating a percentage.

It's just like the one several years ago now when Ofcom ruled that ISPs advertise a total price for a broadband service rather than separate broadband price and line rental price, because they thought that most consumers were too stupid to add two numbers together.

[ITTroll]

Hopefully others, including TalkTalk, will follow the lead and improve on it. I’m sure many customers will be looking for a good deal as they face another above inflation rise this spring.

My own Fixed Price Plus contract ends in March so I’ll certainly be watching with interest. I believe this deal only includes the inflation rise after the contract ends (with no additional fixed percentage increase). So, I wonder what will happen…

[ferguson]

And I think this covers it, even though the change has still to be formally imposed once the consultation period expires. Smart preemptive PR from BT, as the article suggests.

https://www.bbc.co.uk/news/technology-67994514

[ferguson]

OK, they are still going to have price increases over the course of a contract, but in £XX.YY rather than CPI/RPI plus some random extra percentage? So that's OK then! 

[ITTroll]

Exactly, they are banning the extra inflation-linked increase which is currently added to a fixed percentage.

Announcements have been made by BT, EE, Plusnet. I wasn’t sure about linking to competitor sites, but easily Googled.

[ferguson]

Yeah, they are not proposing to ban in-contract price increases as such, just that providers will have to provide precise numbers up front. So instead of: next April your price will go up by CPI plus whatever it will be from next April your price will go up by £XX:YY. 

Any links to those "other providers " announcements that you mention?