One of the cruellest aspects of the cost of living crisis has been the powerlessness of consumers in the face of price rises on some essential goods and services.
In some industries, these price increases have been largely unavoidable. Buffeted by significant increases to energy bills, the result of Russia’s invasion of Ukraine, the government was forced to intervene to support customers via the Energy Price Guarantee.
Connectivity has become an essential in modern life. Whether it’s for home working, educating children or keeping in touch with friends and family, a decent internet connection isn’t a nice to have, but a necessity.
For a few years many of the largest broadband providers have employed a dubious practice of increasing prices annually by inflation plus a seemingly arbitrary 3.9 per cent for customers under contract.
But this year, many people have faced hikes of over 14 per cent – which could be more than £100 annually for customers on more expensive packages. A bitter blow for people already struggling with soaring bills across the board.
While most providers offer social tariffs to customers on certain benefits who are struggling financially, awareness and take up of them remains frustratingly low and more should be done to clearly advertise them.
Which? believes firms must cancel these hard to justify increases. We have worked in good faith with providers over the last year to ask for concessions on increases, but most of them have ploughed on regardless – showing incredible indifference to the plight many customers were facing. Many people were left facing an impossible choice between paying much more expensive bills or punitive exit fees if they wanted to switch to a cheaper provider. Either way, they would lose.
Ofcom’s review, launched earlier this year, of these inflation-linked mid-contract price hikes is welcome. But progress has been slow and the probe is expected to drag on into next year – meaning it will not conclude in time to stop the next round of price hikes in April 2024.
While we wait for the result of the Ofcom review, Which? is demanding the regulator looks more urgently at whether the most egregious practices we’ve identified at Virgin Media are in breach of consumer law.
We believe that Virgin Media’s terms for customers are an attempt by the company to have its cake and eat it by applying aggressive above inflation-linked annual mid-contract price increases, while removing the right for affected customers to cancel without substantial exit fees and also maintaining the right to hike bills further at any time. Virgin Media say they refute any allegations of potential law breaking and claim our views on the subject are “one-sided”. They say that their practices are in line with consumer law and Ofcom guidelines.
The terms state that, from April 2024 Virgin Media can increase customer fees by Retail Price Index (RPI) + 3.9 per cent every year, with no ability for customers to exit the contracts if this hike is applied. RPI is typically higher than Consumer Price Index and its use has been discouraged by the Office for National Statistics, which doesn’t use it.
To compound matters, Virgin Media routinely underperforms in our customer satisfaction ratings and Ofcom is already investigating claims the company has made it difficult for customers to cancel their services.
While Which? has asked Ofcom to proceed urgently with an investigation of Virgin Media, this is a shot across the bows of all other UK telecoms providers too – many of which are poised to inflict inflation-busting mid-contract price rises on millions of customers again in April. Such increases would be hard to justify in normal times. In the midst of the worst cost of living crisis in decades, they are unconscionable.
It’s unacceptable for consumers to be signed up to contracts that seem to make it almost impossible for them to know how much they will pay for service – and if it becomes unaffordable, the only escape for many is to pay exorbitant exit fees.
Ofcom’s review of above inflation mid-contract price hikes should bring long-overdue reform to this unfair system, but before that providers should accept that the game is up, and drop any plans to impose these hikes on customers next year.