Calls for Ofcom to reassess mid-contract price rises

Liz Kendall, the Secretary of State for Science, Innovation and Technology (DSIT), has written an open letter to the regulator, calling on it to "look at in-contract price rises again."

The move follows further hikes by major UK providers, several of which have raised their fixed pounds-and-pence annual increases and, in some cases, applied them to existing contracts.

Although Ofcom banned inflation-linked price rises at the start of January 2025, many of the new fixed-rate increases still outpace inflation, prompting renewed concern from consumer groups and the Government.

Source: Ofcom

Open letter

Writing to Dame Melanie Dawes, Ofcom's Chief Executive, Liz Kendall MP - Secretary of State for Science, Innovation and Technology (DSIT) - has called on the regulator to revisit the issue of mid-contract price rises, less than two years after Ofcom's last review concluded in January 2024.

Citing O2's recent changes, Kendall said she was disappointed and agreed with Ofcom that the operator's price hikes undermine the spirit of earlier reforms aimed at improving pricing transparency and fairness by banning inflation-linked mid-contract rises.

While acknowledging that O2 has complied with current rules by allowing customers to cancel their contracts within 30 days, Kendall urged Ofcom to "go further, faster" to strengthen consumer protections.

In her letter, the Secretary of State asks Ofcom to:

• Re-examine the issue of mid-contract price rises;
• Review how easy it is for consumers to switch providers when facing contractual changes, particularly in light of O2's recent actions;
• Improve transparency in telecoms billing, potentially by breaking down key cost components - similar to recent reforms in electricity billing; and
• Consider requiring providers to offer renewing customers the same deals available to new ones, following the model adopted in the insurance sector.

The letter also highlights wider concerns about inflationary pressures on consumers, stressing that continued price increases for in-contract customers risk undermining government efforts to bring down inflation.

The full letter from Liz Kendell to Ofcom can be found here.

Price rise issues

While O2's actions have served as the immediate trigger for the Government's intervention, the operator's changes follow similar moves by several other major telecoms providers. In recent months, BT - along with its subsidiaries EE and Plusnet - as well as Virgin Media, have all raised their annual price increase rates.

Vodafone and Three UK have also confirmed that they will follow suit in the coming days, implementing higher annual price rises across both mobile and home broadband plans.

Although O2's decision to apply these changes to existing customers has drawn particular scrutiny and prompted renewed calls for regulatory action, the problem of escalating mid-contract price hikes is far broader.

Industry observers warn that more providers are likely to continue this trend, potentially increasing the size of their annual rises further. Smaller broadband operators that already use, or have recently adopted, annual price rise mechanisms - including Hyperoptic, Community Fibre, Cuckoo, Direct Save Telecom, KCOM, Hey! Broadband, and Onestream - are also expected to face pressure to align with these higher increases.

This pattern risks entrenching inflationary pressures within the sector, leaving customers with limited ability to avoid further price rises even when switching providers.

An O2 spokesperson said: "As acknowledged by Ofcom in its letter to providers last week, its rules do not prevent companies from increasing annual price changes - for example, to invest in improving networks for customers.

"A price increase equivalent to 8p per day is greatly outweighed by the £700m we invest each year into our mobile network, with UK consumers benefitting from an extremely competitive market and some of the lowest prices compared to international peers.

"We appreciate that price changes are never welcome, but we have been fully transparent with our customers about this change, writing directly to them and providing the right to exit without penalty if they wish."

Home broadband providers that continue to offer fixed-price contracts - with a commitment to no mid-contract price rises - include the nationally available Rebel Internet, along with a number of smaller, regionally focused operators such as Fibrus, Toob, BeFibre, Lightspeed, Trooli, Airband, Quickline, Brsk, Highland Broadband, and Lightning Fibre.

Similarly, while all major mobile networks apply contractual price rises, many mobile virtual network operators (MVNOs) continue to promise no in-contract increases. This assurance typically applies to 30-day rolling plans, but includes well-known brands such as Tesco Mobile, iD Mobile, Sky Mobile, Giffgaff, Talkmobile, Smarty, VOXI, Lebara, Spusu, and Ecotalk.