Are escalating Broadband Bills a Fair Contract?

Grumpy_chap

Something does seem wrong here - I can understand the contract link to inflation but not why there should be a further increase over and above of an extra 3.9%.  Year on year, not just a one-off.

There is not a monopoly, but something again seems incorrect in so far as every mobile provider I am aware of is applying the "+3.9%" over and above inflation.  That seems to suggest some external factor at play which has aligned the various providers.

We also have to look back over time, though.  I have a SIM-Only contract with Tesco Mobile and in 2017 was paying £15.30 per month for "effectively unlimited (more than I'd ever need)" minutes/data/texts.  I now have two (me and Mrs G-C) SIM-Only contracts with Tesco Mobile for the same "effectively unlimited" service - the price for two is £18 per month.  A massive fall in real terms cost.  Some uplift correction is possibly overdue in favour of the providers.

My decision is now whether to stay with the current Tesco Mobile contracts (includes EU roaming) or switch to a new contract for which the price is fixed for 24-months but with roaming excluded.  Decisions, decisions....

I know my example is for mobile, but the arguments are quite similar for broadband / landline services.  I joined Virgin Media in 2019 at £44.40 per month and the price now is £46.80, so less than 6% over 4 years which has been trending well below the rate of inflation.  At some point, they need to catch up the value to maintain the value.  

If the value of the service is not maintained with inflation, the service providers need to lower the service level, or pay their staff no rise (and lose staff) or limit the costs to all external providers.  That would also cascade down to affect us all. 

If you worked for the switch-box (or whatever other widget used in telephone/broadband services) supplier, would you accept no pay rise because BT & Virgin refused to pay any more than they paid last year but the manufacturer still had to absorb higher energy bills?

the_lunatic_is_in_my_head

We've just had the letter about our services going up, it's currently £48 something and will be another £6.33 a month from the 31st.

Will be calling on the 1st to set up a new contract back at £40 to save around £180 year.

Should have done it last year really but simply forgot which is how they make their money... 

daveyjp

OFCOM stated today in Parliamentary Committee that they are currently undertaking a reveiw of inbuilt price increases in broadband contracts.  The RPI+ increase was introduced when RPI was 1%, no one thought what happens if RPI is 10%.

However if the review is as bad as the performance of the OFCOM CEO at Committee don't expect much to change, she was hopeless.

IamNotAllowedToUseMyName

daveyjp said:

OFCOM stated today in Parliamentary Committee that they are currently undertaking a reveiw of inbuilt price increases in broadband contracts.  The RPI+ increase was introduced when RPI was 1%, no one thought what happens if RPI is 10%.

However if the review is as bad as the performance of the OFCOM CEO at Committee don't expect much to change, she was hopeless.

https://parliamentlive.tv/event/index/319c43cc-6702-44f6-9638-fc293c5ef71e?in=10:49

The gist is mid-contract rises are significant, new contracts haven't gone up, not reviewed in the light of high inflation, and it is not about consumer pricing, it is about funding network rollout through consumer charging, but for 2 years they've not reviewed and the networks are making massive profits. 

born_again

daveyjp said:

OFCOM stated today in Parliamentary Committee that they are currently undertaking a reveiw of inbuilt price increases in broadband contracts.  The RPI+ increase was introduced when RPI was 1%, no one thought what happens if RPI is 10%.

However if the review is as bad as the performance of the OFCOM CEO at Committee don't expect much to change, she was hopeless.

If they do say that they are unfair.
Then expect increased prices for contracts of 18 month or 2 year contracts. Or only 12 month contracts & not a cat in hell chance of a cheaper deal when renewing.

IamNotAllowedToUseMyName

Here is an interesting wrinkle. 

If any element of a term (defined widely) is unfair, the whole term fails under unfair contract law.

Is it fair that if RPI goes negative, prices are not reduced in line? That is clearly a one-sided deal, even if entirely theoretical for the foreseeable future.

So the whole pricing term of the contract fails.

user1977

IanMSpencer said:

Is it fair that if RPI goes negative, prices are not reduced in line?

Is that what the terms say? Is it relevant until such time as we have deflation? It's quite common in indexation clauses to say that inflation is deemed never to fall below zero, but (from a quick look at what Virgin have said) I can't see that they've provided for that - just that it'll be 3.9% above RPI. So a -1% RPI would mean 2.9% increase, and so on. That's no more unfair than when RPI is positive.

IamNotAllowedToUseMyName

The quote is (and Vodafone for example have a different wording with the same intent):

"If the RPI is 0% or less, then your price will increase by 3.9%"

I know this is being pedantic, but the joy of consumer legislation is that it assumes that businesses think details through and have expert advice, any ambiguity is to be interpreted in the consumer's favour.

user1977

IanMSpencer said:

The quote is (and Vodafone for example have a different wording with the same intent):

"If the RPI is 0% or less, then your price will increase by 3.9%"

I know this is being pedantic, but the joy of consumer legislation is that it assumes that businesses think details through and have expert advice, any ambiguity is to be interpreted in the consumer's favour.

Yes, I'd be inclined to think that would be unfair. Might be acceptable to say if RPI is less than -3.9% then the price increase will be deemed to be 0%.

Though as I say, I doubt anybody could do anything about it until such time as we actually have deflation (which doesn't seem likely in the foreseeable future).

IamNotAllowedToUseMyName

user1977 said:

Though as I say, I doubt anybody could do anything about it until such time as we actually have deflation (which doesn't seem likely in the foreseeable future).

But the test is not whether the clause has actually caused unfairness, but that it can be shown to potentially be unfair. To make the point, a clause that says "we reserve the right to increase our monthly charges at any time" is unfair, even if they never rely on it to increase their prices. So if you can demonstrate  that a term is unfair in part, the consumer can decide which parts of the term they wish to rely on.

Clearly, what has happened is the regulator has declared that broadband roll-out requires an escalating price clause, while at the same time, we are supposed to have competition to keep prices down. As all the suppliers have chosen to write the maximum allowed into their contracts, the competition element has been abandoned, and the suppliers are using OFCOM as the excuse to implement what is an unfair and anti-competitive contract.