UK broadband boss admits your price is set before anyone does the sums

Zen Internet connectivity portfolio manager Andy Sayle has said the monthly price on a UK broadband deal is fixed by the market before the provider works out what the service costs to deliver.

Sayle set out how the process works in a nee editorial. “Broadband is mostly bought on comparison sites, where the default sort order is cheapest first and being £2 a month adrift can mean vanishing off page one entirely,” he said.

He said the number on the comparison tile comes first and the job of the provider is then to build a business that fits underneath it, which explains why prices from very different companies cluster so tightly together.

Sayle also said a heavily discounted first year very often fails to cover the provider’s costs at all, and described that discount as the root of the loyalty penalty, retention discounts and mid-contract price rises that customers complain about.

The costs behind the headline number

The wholesale line from Openreach or an alternative network is the only broadband cost with a public price list, which makes it the most visible part of any bill.

Providers also pay for backhaul, core network equipment, transit to reach the rest of the internet, peering agreements and caching servers that hold popular content such as Netflix streams and large game downloads closer to customers.

Sayle said spare network capacity, known as headroom, is one of the first costs to be cut when a provider needs to bring a price down, because customers only notice it when it runs out.

Customer acquisition adds marketing spend, a fee to the comparison site on every sale, the router, postage and any engineer visit, and each switch under the UK’s one-touch system carries its own charge.

What regulation now adds to the bill

Ofcom banned inflation-linked mid-contract price rises for all new broadband and mobile contracts signed from 17 January 2025, and any increase written into a contract must now appear in pounds and pence at the point of sale.

The regulator estimated that around six in ten broadband and mobile customers were on contracts with inflation-linked rises in April 2024, and found 55% of broadband customers did not know what measures such as the Consumer Prices Index tracked.

One-touch switching has been mandatory since September 2024, which means a customer only needs to contact the new provider to move.

Ofcom’s automatic compensation scheme requires participating providers to pay £10.34 per day for repairs that take longer than two working days, £32.31 for a missed engineer appointment and £6.46 per day when a new service starts late, with the rates rising in line with inflation from 1 April 2026.

The scheme paid out more than £63 million to customers in 2024 across roughly one million individual payments, with delays to the start of new services making up £41.60 million of that total.

Where Zen sits in the market

Rochdale-based Zen Internet sells its packages with a Contract Price Promise, which guarantees no price increases for the full contract term.

Sayle said a fixed price means the provider absorbs inflation, wage rises and wholesale increases rather than passing them on, and that risk normally shows up as a slightly higher starting price.

He said in-house, trained and properly paid support is one of the biggest controllable costs in the business and pulls directly against being the cheapest deal on the page.

Sayle added that costs explain a price but do not justify it, and said the industry spends large sums acquiring customers from each other and then discounting again to stop them leaving, with churn ultimately paid for by the customer.

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