UK pressure groups have said it is “completely unacceptable” for telecom companies like BT Group PLC (LSE:BT.A) to increase their prices by more than inflation.
“It would be completely unacceptable for providers to follow BT and inflict another above inflation increase on customers after Ofcom proposed banning this practice, saying it causes substantial consumer harm,” said Rocio Concha, the Which? director for policy and advocacy.
What price hikes?
BT, EE, Three and Vodafone Group PLC (LSE:VOD) are all expected to increase their broadband and mobile prices by 7.9% in April.
The price rises will come into effect a year after much of the industry hiked prices by over 14%.
Most telecom companies have for years raised their prices based on either December or January’s inflation figure plus an extra 3.9%.
TalkTalk is one of the few major UK companies to increase prices based on the inflation figure plus 3.7%.
On Wednesday, it was revealed inflation accelerated to 4% in December from 3.9% the month before, surprising analysts, who had predicted that the CPI figure would drop slightly.
A ban on the practise
Telecom regulator Ofcom is considering banning inflation-linked price rises after launching a probe into the practice.
BT’s boss said on Wednesday the company would be changing the way it details its price increases, instead using pounds and pence increases rather than CPI plus an added percentage.
These changes will come into action in Summer 2024, meaning the inflation-busting price hikes will still come into effect in April.
Ofcom, which is also considering banning mid-contract price rises, said it is bringing through the new rules to provide customers with better transparency.
Melanie Dawes, the Ofcom chief executive, said in an interview on Radio 4 that the changes would make it “much, much clearer for people” after the regulator found most members of the public don’t understand how the current increases work.
However, it could be argued BT’s changes actually pave the way for greater price hikes as it will be tougher to distinguish how much of increases are based on inflation and how much is on top of inflation.