Broadband and mobile phone service providers have been accused of hiding price hikes in customers’ contracts that drive inflation as consumers brace for double-digit increases in their utility bills next year.
Ofcom, the telecommunications regulator, has launched an investigation into whether the firms were “clearly upfront” with customers that bills could rise in the middle of their contracts.
Many broadband and mobile phone contracts include a clause stating that a customer’s contract will increase with inflation, plus an additional fixed percentage, each year, even in the middle of a two-year contract. BT contracts, for example, increase by the inflation rate in the consumer price index each year, plus an additional 3.9%.
Those terms have left consumers facing nearly 14% hikes in their utility bills next year. The Bank of England estimates inflation to hover around 10% in January, which with the added fee prepares clients for inflation-beating price hikes in April.
The regulator said its investigation would be “industry-wide” and did not specify which contracts or operators had caused particular concern.
Ofcom said that following “consumer complaints…we are concerned that some price change terms in consumer contracts concluded between 1 March 2021 and 16 June 2022 may not have been sufficiently clear and transparent”.
The Telegraph revealed in July that Ofcom was considering an investigation into the small print of customer contracts and whether they were fair.
Lindsey Fussell, director of networks at Ofcom, said: “As millions of people face rising household bills, it is more important than ever that telecoms companies do not shirk their responsibilities and keep customers fully informed of what they are signing up for.
“It is vital that people are told clearly in advance about any future price increases they will face while under contract, and we are investigating whether this has happened in practice.”
Ofcom said a third of British households, around 9 million people, are finding it difficult to pay their phone, broadband and streaming bills as costs rise across the economy.
A BT spokesman said its price increases were “clear and predictable, taking place in April each year”. The spokesperson said the company is “committed to ensuring that customers receive clear communications well in advance, reminding them of any changes.”
“We follow industry best practice and will fully engage with Ofcom’s programme.”
Dana Tobak, chief executive of BT rival Hyperoptic, said: ‘This is a big step forward in preventing harm to consumers caused by mid-contract price hikes. As we pointed out in my letter to Ofcom in April, there is overwhelming evidence that consumers are unaware of contract terms and how they will affect them, which is particularly important in this cost-of-living crisis.