New broadband advertising rules introduced late last year are putting off over a third (38%) of customers from switching their service in a move which it is estimated will cost UK consumers almost £53m this year.
The Advertising Standards Authority introduced the new regime December 15 2023, following concerns that broadband providers were misleading customers on mid-contract price rises.
Many of the widely available providers such as EE, TalkTalk or Virgin Media (pictured) include clauses in their contracts that allow them to raise the price on an annual basis, usually based on inflation plus an additional percentage.
The issue came to a head in April 2023, when, because of high inflation rates, broadband customers were hit with hefty price rises of over 14%.
Under the new rules, broadband providers and comparison sites must disclose if a provider has such a clause in its terms and conditions, stating it may raise the price midway through a contract.
However, the rules have had an adverse effect across the broadband market and appear to have discouraged hundreds of thousands from switching their broadband deal, leaving them worse off than before.
Broadband Genie is now calling on providers and Ofcom to banish mid-contract prices outright and work harder to introduce faster switching powers.
Ofcom is currently consulting on changes to mid-contract rises and will publish the result in the spring, with changes coming into effect four months later.
BT has recently moved away from using the Consumer Price Index (CPI) and will start displaying price increases in ‘pound and pence’, with broadband customers paying an additional £3 a month (£36 a year). However, its ‘pound and pence’ campaign is claimed to leave customers worse off than using inflation figures.
An ASA spokesperson said: “The guidance on mid-contract price increases is aimed at ensuring information about price increases – which is likely to be important to people’s decision-making – is clear and prominent, to minimise the chances of them being misled into thinking the initial price will apply throughout the contract if that isn’t the case.
“If Ofcom bans inflation-linked price increases altogether, we will amend our guidance accordingly. We will continue to monitor the situation and adjust our guidance where appropriate.”
However, there are already many providers, including Cuckoo (pictured), Hyperoptic and Zen Internet that have committed to not raising prices for customers mid-way through a contract.
Cuckoo chief experience officer Tommy Toner commented: “It comes as no surprise people are worried about switching broadband. For too long the likes of EE, TalkTalk and Virgin Media have posted huge profits off the back of sneaky price rises which have left people upset and out of pocket.
“People deserve to be treated fairly, which is why we don’t increase our prices mid-contract. Pricing should be fixed for the duration of the contract, and mid-contract price rises are one of the broadband industry’s dirtiest tricks.
“The practice has gone on for far too long. Instead, broadband should be fast, fair and feel good.”
Broadband Genie broadband expert Alex Tofts said: “Switching is an important part of the broadband market and for years, the larger providers have got away with burying price rise information into the small print of contracts.
“Customers need prices to be crystal clear. The ASA intended to reduce the confusion that bill payers experience when they see a jump in their contract, but sadly it’s had the knock-on effect of scaring customers off trying to save money.
“Our analysis indicates that the new rules are a clear deterrent for shoppers looking to switch their deal.
“While we fully support Ofcom’s efforts to curb inflation-linked price hikes, the only solution is to ban mid-contract price rises outright. If smaller providers such as Hyperoptic and Cuckoo can afford to commit no price rises, there is no reason why the larger providers shouldn’t follow suit.
“Customers who have reached the end of their minimum term shouldn’t be discouraged from switching and saving. Although the majority of broadband providers are applying price rises in the spring, the longer you remain on an expired deal, the worse the hikes will affect you in the long run.”
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