Which? magazine has investigated this “loyalty penalty” faced by inactive customers of entry level fibre broadband packages. They analysed the price hikes the 12 largest ISPs impose on customers after their introductory period and the initial discount of their fixed-rate deal has lapsed.
This discounting and then price increase is a common practice among subscription-based services. Broadband providers offer discounted tariffs for the first 12 or 24 months, to lure in new customers. But after the expiry, if these customers don’t sign onto a new fixed rate deal, with their current provider or a new one, they’ll be quietly rolled onto out-of-contract pricing plans, with price increases of up to £192 a year.
Virgin Media was the worst for hiking up prices outside of the initial contracts. Prices on its entry level fibre package, M50, increase by 57% after 12 months, up £16 a month or £192 a year.
Rates on TalkTalk’s Fast Fibre Broadband rose even more steeply, by 60% after the first 24 months, adding £13.55 to subscribers’ monthly bills or £162 a year.
Post Office broadband customers also faced price increases of more than 50%: 54% or £13 a month or £156 a year on its Unlimited Fibre Broadband package after the first 12 months.
Utility Warehouse and Zen Internet, in contrast, don’t levy price increases on their customers after their contracts lapse.
Among the ISPs which do increase prices out of contract, BT and Vodafone were the most moderate. Bills on BT’s Superfast Fibre Essential go up by 19% after 18 months, or £6 a month or £72 a year. Vodafone adds just £3 a month to the prices of its Superfast 1 package, but that 12% increase still means an extra £36 a year for your internet.
Telecoms regulator Ofcom is already seeking to address post-contract price increases and this so-called loyalty penalty. Under new rules, which come into effect 15 February 2020, providers will be required to issue end of contract notifications to existing subscribers 10 to 40 days before the end of their contract.
These notifications must include the contract end date, the price paid before this date, any changes to the service and price after this date, information about any notice period required to terminate the contract, and information about the best deals offered by the provider, including those available to new customers.
Providers will also be required “at least” annually to contact all customers whose initial contract period has expired, notifying them of any better deals available to them.
Ofcom is also launching a review of broadband pricing, to be published in the autumn of this year, which may introduce measures including price caps to help customers, such as pensioners and the most vulnerable, who have the lowest rates of switching.