BT Revamps Price Increase Approach in Anticipation of Upcoming Regulations

BT is revamping its policy on mid-contract price hikes in anticipation of impending stringent regulations from the UK’s communications regulator Ofcom. The company has declared its intention to cease tying price increases to inflation and, instead, articulate in clear monetary terms the precise increments customers can anticipate.

This strategic shift comes in the wake of Ofcom’s discovery last year that the existing practices of telecoms companies regarding price adjustments lack transparency and are potentially bewildering for consumers. Currently, BT’s tariff adjustments are synchronized annually with the Consumer Price Index (CPI) rate of inflation. However, customers find it challenging to gauge the impact due to the fluctuating nature of inflation.

Ofcom’s proposed remedy involves requiring operators to conspicuously state any price hikes in pounds and pence during the point of sale, along with indicating when these changes will take effect. The final decision is anticipated in the coming months, with the implementation of new pricing models expected four months thereafter.

Marc Allera, the BT Consumer chief, acknowledged in a blog post that initiating discussions about price changes is never easy with customers, especially amidst a cost-of-living crisis. Nonetheless, he asserted that such rises are imperative for BT to offset its escalating costs. The company plans to introduce a “clear and simple” pricing approach this summer, moving away from percentage figures and CPI.

Allera disclosed that new mobile customers can anticipate price increases of approximately £1.50, while broadband customers are likely to face hikes of about £3.

Ofcom’s intervention is a response to concerns that opaque price hike policies make it challenging for consumers to budget effectively. BT’s current system involves tariff increases every March, aligned with the inflation data from the previous December, resulting in a 14.4 percent increase for customers last year.

The regulator’s new rules aim to provide customers with certainty about their bills throughout the contract period, contributing to the broader goal of enhancing consumer protections in the telecoms market.

BT has confirmed that it will still implement a planned 3.9 percent rise at the end of March, reflecting the latest CPI figure. However, this is likely to be the final increase tied to the inflation rate before the new regulatory regime takes effect.

This announcement coincides with BT and other providers preparing to disclose their annual price increases for 2024, following a 4 percent inflation spike last month. Recent research indicates that nearly three-quarters of consumers would contemplate switching providers if faced with another increase in their mobile or broadband bills this year.