BT to spell out contract price hikes in pounds and pence BT is ditching mid-contract price hikes linked to inflation before Britain's comms regulator issues a blanket ban in pursuit of greater transparency for customers. Ofcom took a closer inspection of the pricing landscape for mobile phone and web services in 2023 and determined that fresh rules are needed to govern the industry …
I've not yet worked out why the price needs to be any more than inflation up to now.
Because we've been conditioned to accept it. There was news today that inflation was up due to massive increases in tobacco duty. I'm pretty sure it's illegal to smoke in BT vehicles and buildings, and they probably don't spend much on fags. So why do we acccept this as justification for price gouging when there's no connection to any actual cost increases?
Why is it Ofcom think it acceptable to hike prices at all in a minimum term/fixed term contract?
Doesn't matter whether it's set on some arcane formula of an inflation index and a random extra percentage, or whether it's "we'll put your price up by £10 a month every April", it's still unfair to customers unless there's a right to renegotiate or cancel without penalty. For those who are 100% confident of their circumstances and disposable income over the next couple of years it's perhaps acceptable. But for the significant number of people whose income and outgoings are finely balanced, or whose income or employment is uncertain, a set price increase is unacceptable. If BT or anybody else want extra money, bake it in to a fixed price, fixed term.
Unfortunately, in the murky world of arms-length regulators, it's not clear who's responsible for this poor outcome. Is it that Ofcom are captured by the industry they're supposed to regulate? Is it that Ofcom's formal remit requires that they prioritise the profits of companies over fairness for consumer? Is it simple incompetence by Ofcom officials? Is it that the accountable minister - Michelle Donelan wants to cosy up with big telcos? Or perhaps the junior minister responsible, Julia Lopez?
"Why is it Ofcom think it acceptable to hike prices at all in a minimum term/fixed term contract?"
Because OFCOM senior staff are on a revolving door between there and boards of telcos
Hey kids: Can you say 'Regulatory Capture'?
"in the murky world of arms-length regulators, it's not clear who's responsible for this poor outcome"
The Competition and Markets Authority - for not intervening when various technical regulators started exceeding their authority
New Zealand's version of OFCOM was similarly compromised - the Ministry of Commerce (Their CMA) produced a report demonstrating how much economic damage was bring done to the country and intervened
As I recall It started with the energy (or was it water) companies when a windfall tax was discussed in the noughties.. All of a sudden they started bleating about how they wouldn't be able to invest any more
Not a single journalist countered - "Er, excuse me. Don't you pay tax after subtracting how much you have invested ?"
Not a single one.
No wonder the UK is sliding down the shitter.
"Not a single journalist countered - "Er, excuse me. Don't you pay tax after subtracting how much you have invested ?""
No because the UK doesn't have 100% expensing for capital investment (except as of 2023 for plant machinery), instead it is split over multiple years.
You as a company buy a server for £1000, you can subtract 12.5% of it's current value (with its purchase cost as the upper cap) from your revenue each year for 8 years.
Year 1 you can subtract £125 from your revenue.
Year 2 the servers value has dropped to £800 so you can only subtract £100 from your revenue
Year 2 the server is only worth £500, so you can only subtract £62.50
Etc for years 4 to 8.
Buildings are 4% for 25 years.
This is why business don't invest in the UK, 100% expensing (I would prefer it to be over 100% like the temporary 130% during covid) + a higher corporation tax would boost investment.
Multinational companies invest in countries where they are rewarded for investing and pull dividends from countries with low corporation tax.
https://assets.publishing.service.gov.uk/media/604270a5d3bf7f1d0fdfd44e/Super_deduction_factsheet.pdf
‘Plant and machinery’ has a very wide interpretation, and the super deduction was 130% recently 2021-2021 and was replaced on expiry by ‘full expensing”.
“For expenditure incurred from 1 April 2021 until the end of March 2023, companies can claim 130% capital allowances on qualifying plant and machinery investments. Under the super-deduction, for every pound a company invests, their taxes”
https://swoopfunding.com/uk/government-support/full-expensing/
The rules change every year, but, when you deduct £125 in year one, it is now worth £875 for tax purposes in year two. Then you deduct whatever % of that the rules for that year say you are allowed to deduct.
The actual valuation is only relevant if you sell it. If you sell it for more than the tax valuation, you have to pay back the difference. If you sell it for less, or dispose of it, you might be able to claim back the difference, or the difference might be treated as a residual asset that you can continue to claim allowances on over time.
Generally we alternate between years when the allowances are really generous and years where they are not.
100% expensing for capital investment sounds like a present.
So that would mean you get anything you want to buy for free and reap the profits without investing any own money.
Funny, i suddenly get visions of private yachts or other necessities as well as overpriced normal stuff from goodoldchumpscorp being "capital investment".
These in contract price rises will be the next big public scandal.
I don't know whether there has been some post-Brexit change to competition law that means telcos can get away with this, or whether the regulator simply sees its role as one of protecting corporate profits more than consumer interests.
In either case, the overall effect over time is to circumvent competition in an organised way.
It used to be that you could normally get a good deal at contract renewal time. Either a competitor would offer something more attractive in return for the hassle of moving to them, or your existing ISP would keep your existing price or reduce it in return for locking you in so they didn't lose you for a further 12-24 months, maybe with a new router to sweeten the deal.
Now, customers no longer need to be fought for because collective action by ISPs over a couple of contract cycles has successfully raised the overall floor price in the industry by a very significant amount.
You won't be able to shave the manifestly excessive 14% in contract rise back off again at renewal time because all the prices have gone up by that much. And the value the contract lock in now has is purely to the provider in establishing the legal basis for that to continue. The consumer has no choice. You might get a few months discounted from a competitor, but they preserve the overall higher-and-rising price floor in the industry by jumping to the "normal" price after that, as well as adding a further inflation-busting increase the following year.
Sure, this makes it more difficult to calculate the true cost of the contacted service, but that isn't the main effect.
Ofcom focusing on making the price more transparent is a meaningless distraction from a consumer perspective because a subverted market means there is no meaningful price competition keeping a cap on costs.
A price which is higher than it would otherwise be in a fair market is still a high price. Being clearer about its true level doesn't help you avoid it.
The scandal is the collective action and abuse of power by commercial interests working in concert to distort the market over time, with the connivance of the regulator.
Inflation is different for different products and industries. Technology prices, historically, do not rise with the Consumer Prices Index. An index is an average. If you impose a particular level of inflation on a market then by definition you distort it.
There is no justification for a CPI + x% formula, nor for price rises within a fixed contract. Those are unfair terms.
How is it different from continuously doubling leasehold ground rents? In principle, it isn't.
These in contract price rises will be the next big public scandal...You won't be able to shave the manifestly excessive 14% in contract rise back off again at renewal time because all the prices have gone up by that much.
Not they won't and yes you will.
In contract price rises have been willingly swallowed by sufficient consumers that the companies know there's no mass outrage amongst the population, nor is there any desire by politicians to intervene. That's also why Ofcom's proposals are so limp-wristed and pointless. So manifestly unfair, yes, but the next big scandal? I think not.
In terms of new contract prices, you don't need a degree to drive a search engine or use a price comparison web site to find suitably good value discounts. I've just terminated a handset-inclusive contract that at the end was £33 a week, and I've got a similar grade of phone on the new contract with double the data of the previous contract for £25.50, and got £100 cashback and a set of branded earbuds. or I could have gone for a slightly better handset (still no up front payment, but without the freebies mentioned) for £27 a month. A challenger phone like a Xiaomi 13T can be had on a contract that if you subtract the phone value at the cheapest online sim-only price gives you 24 months of unlimited calls and texts and 25 GB of data for £3 a month. The point of that isn't to start a "I've found a better deal than you war", it's just to evidence that networks are offering very competitively priced deals that don't bake in pre-existing contract inflation. That alone should have told Ofcom that the networks were just using in-contract rises to exploit customers.
I doubt anyone will see this later addition, but since I've just helped my ageing mother renew her PlusNet 40/10 VDSL broadband & landline contract I thought I'd come back and put the real world figures on record.
The starting price for an 18-month contract in November 2022 was £21.50 per month and that rose to £26.55 by May 2024.
The best renewal offer available was £24.99 for a 24-month contract. So that's a 16.23% non-reversible price rise over the course of 18 months, with two additional CPI+3.9% rises baked into the duration of the new contract.
A "digital voice" contract (so keeping the same landline number and home phone facility using SIP rather than POTS) would have been even more expensive and would have required extra capital expenditure on backup batteries, for no extra functionality and less redundancy. "Full Fibre" broadband-only would have been no cheaper.
In 2 years' time, there won't be an option to retain the analogue telephone line, and the industry-wide price floor will have been raised substantially again, to the manifest and egregious disadvantage of powerless consumers.
At least telcos aren't spewing untreated sewage everywhere as well as requiring the public to pay over the odds, I suppose... unless you count social media!
"price change is never an easy conversation to have with customers..."
Every time I've had that email come from BT about yet another price rise it's been a fairly one sided "conversation". They're telling me it's going up, and because I'm in that contract I have fuck all choice but to accept it.
I think Marc Allera is getting the word "conversation" confuzzled with "dictation".
because I'm in that contract I have fuck all choice but to accept it.
Why did you accept a contract that allowed that? Did you perhaps not read the small print, or just assume it didn't apply to you?
I'm not saying that the contract is fair or reasonable, but if people keep blindly accepting them there's not much incentive for the companies to offer better ones.
Except that if you decide to use it as a reason to shop around you'll usually find that what's on offer as a contract has become CHEAPER than you're currently paying
One of the reasons for these jackups is an attempt to move you to a new contract and keep you locked in
Despite the claims of "RPI, blah blah", telecommunications costs have been falling for decades and continue to do so
What this needs is the CMA (a business regulator) to step in and assert its authority instead of letting OFCOM (a technical regulator) piss all over the walls
Please do not be offended if my idea is unrealistic but until the ties to the EU are completely severed, couldnt you try to get a South irish or continental provider with roaming ?
I might (and quite surely will) misremember but some of those EU regulations concerning mobile charges did not seem too bad.
Anyway my idea is that with a non british provider at least the price rates will not go up automatically, at least in germany "fixed contracts" are fixed for both parties.
I've had a 070 number for years (Businesses get it as my contact number and yes, I've had marketing calls to it), routed to a SIP
The company providing it has recently started doing the same thing (inflation + 3% - after piling in a bunch of other "opt out" charges such as "hacker monitoring")
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