Ofcom halts inflation-linked mid-contract price rises

19th Jul 2024 10:14

(Sharecast News) - Telecoms providers are to be banned from putting up prices linked to inflation mid-contract, the regulator confirmed on Friday.

Ofcom said a number of major phone, broadband and pay TV companies had changed contract terms in recent years to include price rises linked to future inflation rates.

It meant customers were left "without sufficient certainty and clarity" about prices, as well as "unfairly assuming the risk and burden of financial uncertainty from inflation, which is something people cannot predict and do not understand well".

In particular, Ofcom found that 55% of broadband customers and 58% of pay monthly mobile customers did not know what various inflation rates, such as the consumer price index, measured.

As a result, from 17 January 2025 providers will be prohibited from including inflation-linked price rise terms in all new contracts.

Instead, any price rise written into a contract will need to be set out "prominently and transparently" in pounds and pence at the point of sale. Providers will also be required to be clear about when price changes will occur.

Cristina Luna-Esteban, telecoms policy director at Ofcom, said: "People need to have certainty about their monthly outgoings. But that's impossible if you're tied into a contract where the price could change based on something as hard to predict as future inflation."

The regulator estimated that around six in 10 customers were on contracts subject to inflation-linked price rises as at April 2024.

Ofcom first proposed the ban in December, and has opted to finalise its decision following a consultation. BT Group and Vodafone have already announced they will introduce a new pricing model, in line with the changes.