Broadband and mobile operator Virgin Media and O2 (VMO2) have today become the latest ISP to adopt Ofcom’s new guidance on inflation-linked annual broadband price rises. In practice, this means that new and re-contracting (upgrading) customers will be hit by a flat price increase of up to £3.50 (monthly) each April.
The new policy reflects the regulator’s earlier move to BAN broadband ISPs and mobile operators from doing mid-contract price hikes that are linked to confusing inflation and percentage-based changes (here). BT, Plusnet, EE, TalkTalk, Vodafone and others have already adopted a similar approach to the one that Virgin Media are now deploying.
However, Ofcom’s change was never designed to stop mid-contract hikes completely (it’s more about making future pricing clearer and simpler), but it did require providers to tell customers precisely what any future price increases would be when they sign-up (“in pounds and pence“). This rules out changes to core subscription prices that are linked to unknown future inflation values or percentages.
In short, new and re-contracting Virgin Media customers will see their prices rise by £3.50 a month effective each April, while O2 customers will see their airtime bill increase by £1.80, effective each April (their monthly device payments remain frozen at a fixed price). Customers on VMO2’s Social Tariffs and Talk Protected landline services are exempt from price increases.
Elsewhere, O2’s MBB (mobile broadband) and smartwatch customers will receive an annual price increase of 75p – half the amount that EE customers are experiencing.
A VMO2 spokesperson said:
“From January [2025], we’ll change how we communicate and implement price increases. All future price changes will be included in customers’ contracts in pounds and pence, giving them even more certainty about how their bills may change over the course of their contract.
For new and re-contracting Virgin Media customers, this will be a flat increase of £3.50 a month, effective each April, while airtime price increases for O2 customers will be £1.80 a month, with device payment amounts remaining frozen. At less than the cost of a takeaway coffee or a sandwich, this represents excellent value for connectivity that our customers are using more than ever before, at the same time as we invest more than £5 million a day in our networks and services to give our customers the fast and reliable connectivity they increasingly rely on.”
The concern for consumers is that this approach does have its flaws, such as with the fact that it may make some entry-level packages more expensive than they would have been under the old system (particularly now that RPI inflation has returned to a more normal level). The fact that providers can specify a specific rise ahead of time will also do little to dampen calls for an outright ban on mid-contract hikes in favour of fixed term pricing.
However, not all ISPs adopt the same approach as the biggest players and many smaller providers, particularly newer alternative networks (altnets), often promote packages with simple fixed price terms. We should also point out that Ofcom won’t formally begin enforcing this policy change on the market until 17th January 2025, but that’s not far away now.
Finally, consumers should take note that Ofcom’s new policy is typically only focused upon the core subscription price of a package, thus call charges and any paid add-ons may still adopt a different approach. VMO2 also argues that it needs to raise prices because its own costs keep going up due to increases in data usage, network upgrades, new regulations, new features / content and service delivery costs etc. (e.g. energy bills more than doubling over the last two years). Inevitably, those increases often end up being passed on to consumers.