Ofcom Decides Against Social Tariff for Broadband

Ofcom’s investigation of affordability and debt in the broadband market has ended with the regulator choosing not to push a regulated social tariff onto the industry.

Research conducted by the regulator last year revealed that 6% of UK households—around 1.5 million—struggle to afford their broadband bills. Citizens Advice has put the figure higher, at around one in six households.

Last December, Ofcom “strongly encouraged” broadband providers to introduce social tariffs, affordable deals pitched at consumers on benefits or low incomes. 

Currently, BT, Virgin Media and Hyperoptic offer social tariffs, with the latter two launched recently and BT expanding eligibility to all recipients of Universal Credit and upgrading the service to fibre in June.

For now, Ofcom won’t go further than that strong encouragement, after finding that the price of broadband tariffs is down and that uptake of existing social tariffs is low.

In 2020, average ‘new customer’ prices for superfast (20Mbps) broadband were nearly 20% cheaper in real terms than in 2015. This while traffic on internet networks has soared—with data use up 342% per household—and speeds have accelerated 178%.

While households may have difficulty affording bills, most still manage to pay, seeing broadband as essential. Even following the financial upheaval of coronavirus, just 2% of broadband customers are in arrears. 

Total debt among broadband and mobile customers was £550 million in January 2021, up from £475 million the January before. 0.1% of broadband customers are disconnected by their provider each month.

Just 40,000 households are signed up to one of the existing social tariffs, representing 0.15% of all UK homes or 1% of those receiving out-of-work benefits

Ofcom has laid some of the blame for some of that low uptake on providers, which “need to improve how they promote [their social tariffs].”

Ofcom left open the possibility that it will enforce mandatory social tariffs at a later date if the industry doesn’t address concerns it has highlighted, including variation in how providers treat customers in debt or struggling to pay their bills, leaving some customers treated poorly.

Lindsey Fussell, Ofcom’s Networks and Comms Group Director, said: “We’re concerned that many households on the lowest incomes are struggling to stay on top of their bills and providers need to take action to make sure these customers get the help they need.”

However, Citizens Advice says that the regulator’s encouragement may not be enough. Matt Upton, Directory of Policy at the consumer charity, said: “The fact that so many providers still aren’t taking responsibility for protecting lower income customers shows just how precarious it can be to rely on voluntary arrangements and goodwill. Ofcom are right to say things aren’t happening quick enough. If we don’t see action soon, the government needs to get involved.”

However, the government has suggested it has little appetite for a mandatory social tariff. Liberal Democrat Peer Lord Clement-Jones put the question directly to the government earlier this month, asking if it would “commit to requiring all providers to offer an affordable social tariff for low-income families, as recommended by the Lords Covid-19 Select Committee?”

Baroness Barran, representing the government, ducked the question, saying the government is working with providers of existing social tariffs to encourage uptake. “Some 99% of households can access an affordable tariff, but the take-up of [social tariffs] is much lower than we would hope, and Ofcom has recommended more proactive marketing of those tariffs,” she said.

BT said that take-up of its fibre Home Essentials tariff has been strong since it launched at the end of June but acknowledged that some customers are embarrassed to share their financial situation and may not ask their internet provider for the support available.

A spokesperson for BT told ISPreview: “We want to help break down those barriers of asking for help with Here For You—a campaign to raise awareness of the all the support we provide customers who need more help—and we encourage similar approaches across the industry.”