The historically high inflation rates of the last year continue to affect every corner of the economy. The cost-of-living crisis is clearly impacting the housebuilding sector, threatening to dampen property demand; pushing down on margins as construction costs increase and slowing the speed that new properties can be turned over. In the UK housing market as a whole, values are beginning to fall.
Allied to this, many analysts fear that interest rates – which have more than doubled in the last 6 months – are still yet to peak. Homeowners are caught in a perfect storm of larger mortgage repayments combined with big increases in the price of food and other essentials, and energy bills going through the roof.
This is the backdrop against which many providers of broadband – the so-called ‘fourth utility’ – are making matters worse for already stretched household budgets. I’m talking about the quite shocking behaviour of the biggest broadband providers levying mid-contract price rises of over 14% from April onwards.
Boosting revenues at the expense of people struggling with the cost of living
The ‘mid-contract price rise’ is a clever tactic woven into many broadband agreements. It’s there in the contractual paperwork used by BT, EE, Plusnet, TalkTalk, Vodafone and others. It entitles them to increase customers’ monthly bills on an annual basis, typically by the prevailing rate of annual inflation (CPI, which is 10.5%) plus 3.9% on top. Many are doing just that in April’s billings, hitting customers with a whopping 14.4% in total. Data from the ONS says that, on average, households will see a rise of £11.25 per month. Based on around 19 million in-contract broadband subscribers, that’s a £1.4bn windfall for the broadband providers’ coffers.
Research by Hyperoptic at the end of last year found about 60% of customers were simply unaware they’d signed up to such a clause – though, since then, they’ll have received notifications that their direct debit amounts are set to change. A separate study found that 80% viewed the move as “the giant internet providers taking advantage during the cost-of-living crisis”, and want to be able to walk away from a broadband deal if the cost goes up during the life of a contract.
Taking a stand against unfair practices
Hyperoptic has never hiked its prices mid-contract – we don’t agree with this unfair practice and instead want to focus on doing the right thing by our customers. We are continually campaigning at the highest levels to introduce reform. We began to lobby Ofcom on this matter in April 2022, and the regulator has since started an investigation into whether enough was done by broadband service providers to communicate the existence of mid-contract price changes to customers before getting them to sign deals. A positive step, but it won’t prevent the price rises from hitting next month.
In our view there should be far greater transparency, and if a provider chooses to hit its customers with a mid-contract price rise then those same customers should be free to switch elsewhere without paying early termination charges.
We’re very passionate about this and want to help in practical ways. That means spreading as much awareness as possible, including launching an online price increase calculator allowing people to find out exactly how much more they’ll pay over the remaining life of the contract, so they can budget for that and choose a different provider when their contract expires. We’ve also taken steps with our Switch Now offering to ensure that, if they choose us, they could get up to 9 months’ free service.
‘Doing the right thing’ through social tariffs
Whatever you think of mid-contract price increases (and I emphasise ‘mid-contract’ as the bone of contention – few would disagree that price changes outside of a contractual period are fine), surely everyone can get behind the idea of social tariffs.
Social tariffs are packages that broadband service providers offer to qualifying customers at a discounted rate. The discounts are typically substantial – up to 40–50% in some cases – with eligibility criteria covering people on universal credit and other benefits. The shame about social tariffs is that uptake is nowhere near where it could be. Many eligible customers are unaware of the money they could save, or may feel stigmatised. An Ofcom study found that only 31% of eligible groups know they even exist.
So we’re getting the message out there. Hyperoptic’s set of social tariffs provide essential broadband connectivity for those facing increasing cost-of-living pressures. And unlike other providers’ tariffs that tend to cover only the most basic broadband requirements, ours are faster. As our founder and CEO, Dana Tobak, says: “Just because a family is eligible for a social tariff, doesn’t mean they should be limited to slow speeds.”
In fact, Hyperoptic’s Fair Fibre 150Mb plan is already the fastest broadband available on a social tariff – more than twice the speed of any plan the major providers offer. In the last few months, we’ve permanently reduced its price from £25 to £20 per month. Our other social tariff also packs a punch too, with the Fair Fibre 50Mb plan priced at £15 per month. Both are available to any eligible new or existing customers to move to at any time, without penalty, and don’t need a credit check. There’s no tie-in either – all plans are 30-day rolling agreements.
And there’s definitely no mid-contract price increases either. Because that wouldn’t be doing the right thing at all.Jo-Anne Dunning, Business Development Director, Hyperoptic