How consumer protection backfired and left you with a more expensive phone bill
Key Points
- Ofcom introduced rules to curb mid-contract price hikes, but instead this had led to higher bills for most mobile and broadband customers.
- Research from MSE found that three in four customers are worse off thanks to this intervention by the regulator.
- Cheaper tariffs are hit hardest: unless you are paying more than £34 per month on your phone bill, you are worse off under the new system.
- MSE founder Martin Lewis said the simple answer is just to ban mid-contract price rises that are above inflation.
A rule introduced to protect consumers from confusing price hikes has backfired, leading to most people paying more for their mobile phone bill.
Following public outrage at high mid-contract price hikes for mobile contracts in 2024, Ofcom stepped in to try and curtail this practice. It did this by requiring mobile operators and broadband providers to set out planned price increases in plain pounds and pence, not percentages.
Additionally, firms could still hike prices in the middle of a contract, provided they gave customers 30 days after they were told to end their contract at no cost.
Money Saving Expert (MSE) has researched the effects of this rule change and found that while price rises may be clearer to customers, most people are actually paying more than they would have done under the old system.
According to the research, three out of four mobile and broadband customers in the UK would be paying less than they are now had Ofcom allowed companies to stick with their old inflation-linked approach to price rises.
Customers on cheaper packages hit hardest
Those who are most likely to have seen their bills rise due to the new rules are those who are on the cheapest packages.
As broadband and mobile providers can no longer increase bills in line with inflation, they now instead outline flat increases to contract prices which often end up being higher than inflation for most packages, except the most expensive.
MSE found that mobile customers would need to be paying more than £34 per month to benefit from the new system over the old rules, and broadband customers would need to be paying almost £55 per month to be better off.
Conversely, if you are on a £8 monthly mobile tariff, your price rise under the new system is around 31%, compared to the 7.3% rise you would have been subject to under the old system.
In fact, 99% of those with mobile packages under 10GB, and 98% of those with mobile packages between 10GB – 100GB are worse off under this new pricing rule.
The only group of customers who have largely benefited from the new pricing regime are those on unlimited mobile packages, with only 28% of those customers worse off compared to the previous approach.
Even for these customers, however, the price hikes they are subject exceed consumer inflation 99% of the time.
‘Just ban price rises above inflation’
MSE founder Martin Lewis recently gave evidence to the House of Commons Public Accounts Committee, where he outlined how Ofcom’s rules have failed customers and resulted in them paying more in most cases.
He previously advocated for Ofcom to solve the problem of mobile operators inflicting above-inflation price rises on their customers by simply banning mid-contract price rises that are above inflation, if not banning the practice of raising prices mid-contract entirely.
“The solution has always been bleedin’ obvious. Just ban above-inflation mid-contract price hikes,” Lewis said.
“Of course, many, including me, would prefer a ban on any mid-contract rise, as the price you sign up for should be the price you pay over the length of the contract. Yet that risks possible market distortion, as firms may lift initial prices as a provision against unexpected costs mid-contract.”
“So, a simple, ‘no rises above inflation’ rule seems a reasonable compromise,” he said.
“And our research shows compared to Ofcom’s solution, if this had been in place it would’ve meant lower rises for over 99% of people.”
