Broadband customers trapped by price hikes and exit fees

Consumer champion specialist, Which? is calling on telecoms firms to let customers leave without penalty if prices are hiked mid-contract, as new research shows that many broadband customers are trapped in a lose-lose situation where they either have to accept exorbitant mid-contract price increases or pay exit fees of over £200.

Many broadband firms – such as BT, EE, Plusnet, Shell Energy Broadband, TalkTalk and Vodafone – raise prices every April in line with the Consumer Price Index (CPI) plus an additional 3 to 3.9 per cent. These price increases are often applied mid-contract and mean people end up paying more than they originally signed up for.

Based on figures from Which? has calculated how much an in-contract BT, EE, Plusnet, Shell Energy Broadband, TalkTalk and Vodafone customer could see their payments rise by.

This year, many customers are facing mid-contract price hikes of more than 14 per cent. BT Group, which includes BT, EE and Plusnet, has already announced that they will not intervene and will go ahead with price rises of 14.4 per cent for the vast majority of their customers. The average EE customer would see the largest potential annual increase of £66.89. This is closely followed by BT customers who could pay an extra £65.59 a year.

Vodafone, TalkTalk and Plusnet customers could pay an extra £54.86, £54.22 and £52.67 a year respectively. Shell Energy Broadband customers could see the lowest increase of this group – but still an eye-watering £49.51.

Given many of these customers already saw their broadband bills increase by nearly 10 per cent last year, this is another blow for those looking to keep spiralling costs under control. As broadband contracts typically last for 18 or 24 months, customers do not know how much prices could rise by when they sign up.

Ofcom rules state that telecoms providers must offer their customers the right to exit their contract penalty free if they are subject to unexpected price rises which are not provided for in their contract.

But because mid-contract price rises are written into the terms and conditions of some people’s contracts, Ofcom’s rule is that in those cases the customer does not have the right to exit penalty free  – meaning customers have no choice but to accept the new higher price or pay an exit fee to terminate their contract.

However, the rules do require the relevant terms to be set out prominently and transparently, at the point of sale. Ofcom is currently investigating whether in-contract price rises were set out clearly enough by phone and broadband companies before customers signed up.

Which? calculated the exit fee the average customer of each provider with 12 months remaining on their contract would face if they left early. BT customers face the highest exit fees of £219.04.

This is followed by Shell Energy Broadband, EE and Plusnet customers, who would pay £160.20, £150.49 and £144.75 respectively. Vodafone and TalkTalk customers would pay the lowest exit fees of £123.72 and £122.40 respectively. Shell Energy Broadband and TalkTalk have fixed exit fees, while the others are calculated based on the average monthly price customers pay according to Which?’s broadband survey.

A good broadband connection is essential to modern life. Which? is calling on all providers to carefully assess what level of mid-contract price rises can be justified in the current economic climate and allow customers to leave their contract without penalty if prices are hiked mid-contract – regardless of whether or not these increases can be said to be ‘transparent’.

While Sky and Virgin Media have not announced this year’s approach to price increases, they traditionally allow their customers to haggle or switch when notified of such hikes.

Other providers commit to keep prices the same for the duration of people’s contract. For example, Zen Internet, Hyperoptic and SSE all promise not to raise prices during people’s minimum contract period.

While these are all important steps in the right direction, all providers need to step up and play their part to support their customers through the cost of living crisis. Consumers should not be left trapped in unaffordable contracts – and should be able to leave without penalty if they do not want to stay with their current provider or haggle for a better offer if they prefer to stay with their provider.

Rocio Concha, Which? Director of Policy and Advocacy, sai “It’s hugely concerning that many broadband customers could find themselves trapped in a lose-lose situation where they either have to accept exorbitant – and difficult to justify – mid-contract price hikes this Spring or pay costly exit fees to leave their contract early and find a better deal.”

“Which? is calling on providers to let their customers leave without penalty if they face mid-contract price hikes. Providers should also carefully consider the level of any price rises when many consumers are already under huge financial pressure.”

“With many households struggling to make ends meet, it is completely unfair that people are trapped in this situation. Telecoms providers need to step up and play their part to support their customers through the cost of living crisis.”