BT Price increases - Fair?

Hi
Like many others... I am not at all happy about the BT price increases which is just under 15%.
I know their costs are increasing too but I don't agree that their costs are going up by 15% - but what do I know?!
What I do know is..
Last year in their annual statement it shows that in their consumer business BT's operating profit was = £841m
They say the total number of households they have in their consumer business is = 14million
So that's about £56 of operating profit per household on average.
I'm keen to see what their next annual statement will say and while I realise they have to provide a healthy return on investment to their shareholders, I think the price increases are inappropriate.
Please someone tell me I have missed something …

In reply to a post by SpeedyPdA:

Please someone tell me I have missed something …

You have missed the point that those who have signed up for BT and some other broadband providers on the Openreach network have agreed to this increase. There are other providers thats haven't increased their charges to the same level so people should have picked one of those rather than be unhappy with BT when they invoke what the contracts says.

You have already had Hey broadband installed so you have a way out, this issue going forward shouldn't affect you.


***Advice to everyone, read all contracts before you sign them.***

Edited by deleted (Tue 04-Apr-23 16:22:13)

You are right that Hey is now installed at my property and yes my contract did say they could increase prices every April. BT can do many things 'contractually' but it's their choice what they actually do.
What else am I missing?

If a company can increase their price they will.

Supermarkets have made huge profits but the essentials, milk, bread, etc are increasing in price every 2 weeks.

You're probably missing the few bob that BT are putting in to FTTP and 5G build.

You are missing the increases in Electricity prices they have had to pay for the last year, (hopefully these will decrease next year and reduce the increase they could apply. Also the pay rise they are paying to staff and the huge investment in FTTP that has to come from somewhere. Plus the loss of revenue from voice which is now insignificant.,

Food prices have gone up and I can see in most cases the relationship between the increase in costs in agriculture and transportation costs. In some cases, the lack of real competition allows the supermarket end of the supply chain to be very unreasonable with pricing strategies.
Maybe we need more viable competition in the telco/media sector.

Hi FibreBubble
The capital expenditures into infrastructure come out of their Openreach business, not consumer business. For regulatory reasons I believe the two need to be accounted as two different parts of BT group. But ultimately BT , along with TalkTalk and Sky pay Openreach for access to that and in fairness the cost of infrastructure does increase, but again if you breakdown the cost profile some of it is impacted by high inflation, most of it is not from what I can see. But to your exact words, a few bob goes here - yes.

Hi kitcat
In the telco industry the usual benchmark for spending on energy cost is about 8% of the total expenditure. That cost has indeed gone up a lot! But only makes up ~8% of the cost base.
Per other response to a fellow contributor, infrastructure is mainly openreach and that is not part of the consumer business, segmented in specific ways for regulatory and competition reasons.
Openreach wholesale price (which they charge to BT consumer, TalkTalk and others) generally increased but in some areas decreased, for example the newer tech saw a price decrease in real terms (less than CPI) while older servicers e.g. copper took the brunt of the increases. (https://www.openreach.co.uk/orpg/home/products/pricing/loadPricingNotifications.do).
I still don't get the full 15% and where that goes. Eagerly awaiting their next annual accounts.

I don't think fairness comes into it, just whether something is legal or not. If you want fairness then you're looking towards community interest corporations.

BT Group is funding FTTP build rather than just Openreach and they are funding it to the tune of £15,000,000,000.

Funnily enough, back when peeps were calling for Openreach to be split from the group the accusation was that money was being taken out of Openreach and given to Retail in order to pay for football.

Nowadays money is being taken out of Retail and given to Openreach for FTTP build and resulting sacrificing of customers from Retail is a calculated risk. Perhaps it is better to fund investment from cash flow than borrow a shed load of cash in a time of rising interest rates like other network players.

Perhaps the real winners are players like Sky and TalkTalk who can mirror the retail price rises without the access network investment and benefit from Openreach price reductions.

Edited by FibreBubble (Tue 04-Apr-23 20:23:14)

In reply to a post by SpeedyPdA:

Hi FibreBubble
The capital expenditures into infrastructure come out of their Openreach business, not consumer business. For regulatory reasons I believe the two need to be accounted as two different parts of BT group. But ultimately BT , along with TalkTalk and Sky pay Openreach for access to that and in fairness the cost of infrastructure does increase, but again if you breakdown the cost profile some of it is impacted by high inflation, most of it is not from what I can see. But to your exact words, a few bob goes here - yes.

AFAIK, 3.9% of increase is being allowed for all ISP's to cover capital expenditure on infrastructure, the remainder of increase is inflation, quite how much this affects BT I'm not sure, but most ISP's are increasing prices by around the same, the only exception I can see amongst the larger ISP's is Sky. So this is not a case of whether BT price increase is fair, but if all (except Sky) are fair.
I note that you talk of "healthy return on investment for shareholders", well go back couple of years and they didn't pay a dividend in response to C-19 and a need to invest in fibre.

community groups is one way. Making markets as competitive as possible is another good way, but I recognise that's tough when talking about something like this. But I hope the market continues to open up and become more efficient.

Hi Fibrebubble - I did not know this and i'm surprised this is allowed.

In reply to a post by SpeedyPdA:

community groups is one way. Making markets as competitive as possible is another good way, but I recognise that's tough when talking about something like this. But I hope the market continues to open up and become more efficient.

You say that but haven't BT/Openreach been trying to make the market more competitive using Equinox 2 but the altnets are up in arms and don't seem to want it.

Hi burble
I wasn't aware ISPs were given specific permissions as it relates to setting price increases, I thought consumer pricing was set by the companies as they wish (with the exception of BT where they cannot go too low for anti-competitive reasons). But not something I know too much about. I didn't know Sky - very interesting.
As another has commented earlier in the thread, I have made the decision to go with another provider while I run down the last couple of months of my BT contract. The other provider is HeyBroadband, an alternative network provider which runs their own FTTP infrastructure, on the smaller side with 5000 customers in the UK, reasonable price, fixed price for the term of the contract. So far so good but time will tell if these new entrants are able to keep prices low and service high.

In reply to a post by dect:

In reply to a post by SpeedyPdA:

You say that but haven't BT/Openreach been trying to make the market more competitive using Equinox 2 but the altnets are up in arms and don't seem to want it.

An interesting one for Ofcom to figure out, I understand they will publish in the next month or so.
From my [simple] perspective, we need to make sure that market share is spread sufficiently so that no one market player has too much control which then impedes on the pace of innovation, service quality and consumer pricing. Does Equinox 2 price reductions help or hinder that... I actually don't know.

Price rises are basically in the contract.

RPI plus some percentage.

I don't think most businesses expected inflation to be so high, but it is and so the contract says that's the increase.

Not putting prices up could be a marketing plus but as their costs are going up there's not a lot of commercial incentive to keep them the same.

For those struggling with costs there are social tariffs available.

If Heybroadband where to build out their network to my area and offer those prices I would be interested, but they will never do that, the costs for them would be high and then they would be charging just the same as BT.
As it happens my contract has just run out and I'm now paying a lower price than I was previously paying, next year I will be hit by 3.9%+ CPI increase, but the year after I will be looking for deals again.

In reply to a post by burble:

AFAIK, 3.9% of increase is being allowed for all ISP's to cover capital expenditure on infrastructure

Who is it being "allowed" by? Does anything stop them putting CPI+50% in their contracts if they wanted to?

Most ISPs buy tail circuits from Openreach. At the lower speeds (40M) these wholesale prices are regulated by OFCOM, and index linked by a formula. It was 11% rise this year - much lower that the ISPs applied to their customers.

But given that ISPs are continuing to sell services to new customers at the *old* prices, it shows that their cost bases aren't increasing significantly. Rather, these CPI+ rises are really just a way to make the headline contract price look lower at the time the customer signs, whilst locking them into paying a higher price when averaged across the whole term.

I [obv] agree a lot with what you are saying here.
This is why I think proper competition helps to challenge this and give consumers greater choice.
I've switched to a provider who will not raise prices for the duration of the fixed contract period (24mnths) and I am lucky to have a choice. It's not fair for the vast majority who do not have these choices.

we need to make sure that market share is spread sufficiently so that no one market player has too much control which then impedes on the pace of innovation, service quality and consumer pricing.

I don’t agree.

Whilst competition is OK, this is often done by price cutting, and that does not assist innovation or service quality.

In reply to a post by SpeedyPdA:

Hi burble
I wasn't aware ISPs were given specific permissions as it relates to setting price increases, I thought consumer pricing was set by the companies as they wish (with the exception of BT where they cannot go too low for anti-competitive reasons). But not something I know too much about. I didn't know Sky - very interesting.
As another has commented earlier in the thread, I have made the decision to go with another provider while I run down the last couple of months of my BT contract. The other provider is HeyBroadband, an alternative network provider which runs their own FTTP infrastructure, on the smaller side with 5000 customers in the UK, reasonable price, fixed price for the term of the contract. So far so good but time will tell if these new entrants are able to keep prices low and service high.

Most ISPs have it in their contracts that the they will increase prices by CPI + a %age. Sky just state there will be an annual increase. Historically, Sky have never increased prices by more than 10% and this year seems to be no different. My increase with Sky is only 9%.

In reply to a post by Zarjaz:

we need to make sure that market share is spread sufficiently so that no one market player has too much control which then impedes on the pace of innovation, service quality and consumer pricing.

I don’t agree.

Whilst competition is OK, this is often done by price cutting, and that does not assist innovation or service quality.

So where do you buy fuel for vehicles that you own?

Not that I am here to promote sky, I don't have their products nor do I plan to at this stage, but from what I have now heard from a few people... their price increase has been below CPI and that I commend as I genuinely believe that telco and media have not truly had their cost bases increase to the same extent as how CPI is calculated. The basket of goods/services to calculate CPI is different to the costs of a media / telco company. and it seems Sky is more accurately reflecting this.

This doesn't take away from the fact that telco and media companies have been hit in other ways.

Surely it's Ofcom we have to thank for this? I think it was early last year that Ofcom agreed with ISPs for annual increase of February CPI+3.9%. With years of low interest and CPI rates this was OK but anyone with any sense could see the bubble forming even without the antics of certain politicians. It was no surprise when inflation rose to 10% and the ISPs gleefully imposed the hefty price increases they were granted by Ofcom.

So where do you buy fuel for vehicles that you own?

Most often charged at home.

In reply to a post by Zarjaz:

So where do you buy fuel for vehicles that you own?

Most often charg ed at home.

With the rediculous price of electricity at the moment I hope that is not to much!

In reply to a post by Michael_Chare:

With the rediculous price of electricity at the moment I hope that is not to much!

EV's charged at home only pay the 5% VAT, compared to out and about. Hard to compare as we don't have petrol/diesel sold in kilo watts, but its generally cheaper, just not as cheap as it was. Where its expensive is the public chargers... (and why those that can't charge at home are upset at the plans to force everyone to electric).

Most EV folks in the know are using OVO Charge Anytime at home

In reply to a post by Malwaremike:

Surely it's Ofcom we have to thank for this? I think it was early last year that Ofcom agreed with ISPs for annual increase of February CPI+3.9%. With years of low interest and CPI rates this was OK but anyone with any sense could see the bubble forming even without the antics of certain politicians. It was no surprise when inflation rose to 10% and the ISPs gleefully imposed the hefty price increases they were granted by Ofcom.

Yes, it was an arrangement that OfCom seems to have been conned into, I guess they thought nobody would worry much about a 4 or 5% increase. It's laughable that .gov have told people they shouldn't expect wage rises inline with inflation, yet a regulatory body set up by .gov thinks it ok for prices to go up way above inflation.

In reply to a post by candlerb:

In reply to a post by burble:

AFAIK, 3.9% of increase is being allowed for all ISP's to cover capital expenditure on infrastructure

Who is it being "allowed" by? Does anything stop them putting CPI+50% in their contracts if they wanted to? ...

In reply to a post by Malwaremike:

Surely it's Ofcom we have to thank for this? I think it was early last year that Ofcom agreed with ISPs for annual increase of February CPI+3.9%. ...

@candlerb asks where the C/RPI + 3.9% formula comes from. I'm interested too. @Malwaremike asserts it's Ofcom, but doesn't give any reference - could one be provided? I've had a good hunt but can't find anything. The Ofcom pricing trends review of Dec 22 makes no reference to any Ofcom rule. On the contrary, the introduction to section 3 states that "Ofcom does not regulate retail prices". Section 2 implies that it was the CPs that came up with the 'inflation + x%' formulae, and that the x is chosen by each provider (so what a strange coincidence that they all came up with 3.9% or thereabouts). Best I could find is this from Daniel Barnett, who is apparently a barrister (I don't listen to LBC) who says increases are 'capped at inflation + 3.9%', but again doesn't give a reference.

So while the hikes may be limited by some legislation or other, I suspect we can't blame Ofcom for this one. Can anyone clarify?

I started a thread on this almost a year ago so nobody can say it comes as a surprise.

Indeed Ofcom agreed to the principle of CPI+extra% as far back as 2013, see here if you want to plough through it.

Sorry don't have ref to the 3.9% figure but it was being punted from early last year if not before. Ofcom keeps as tight a hold on ISPs as Ofwat does on the water/sewage industry

Lifted straight off of this page https://www.ofcom.org.uk/news-centre/2023/review-of-...

If the increase uses an inflation index such as CPI or RPI, then providers should use the most recent figure. An example of wording setting out a price rise could say: In April each year, your price will increase by an amount equal to the CPI rate published in January of that year, plus 3.9%.

But that's nothing more than an example! It doesn't say that providers can't use a lower or higher value than 3.9%, any more than it says that providers *must* include an annual increase at all, nor whether such an increase should be linked to CPI or RPI.

Well I'm just having a rest from trawling t'internet, I've found several referances on OfCom's website to +3.9%, but so far only this from Lightning saying it's allowed under rules.
https://www.lightningfibre.co.uk/post/how-much-will-...

Experts predict broadband providers will increase internet costs by a massive 14.4 per cent in April, as permitted by Ofcom rules.

The agreement allows companies to raise charges by the rate of inflation - which is now 10.5 per cent - plus an additional 3.9 per cent on top.

Just to add some context,

Hyperoptic don't put up there prices mid contract or at any other point .

My 1Gig connection has remained at £40:00 per mth for the last two years after my first discounted year had passed .No increase regarding inflation and no increase regarding them having higher running costs for some of the points other users made above ^^

higher wages for staff
higher fuel bills
higher electricity costs

the cost of my package has remained the same . it obv works for there business model to operate this way ..... Maybe other ISP'S could learn something from them regarding constant package increases

Edited by djfunkdup (Thu 06-Apr-23 22:52:49)

Surely it is something that would (or should?) come under the terms of unfair contract legislation?

Both parties entered a contract for the delivery of a service for a given period.

Now it is down to the skill of the provider to deliver that contract at the agreed price for the period of the contract.

In some cases (BT, Virgin, etc) those providers have chosen to implement at formulaic increase which will almost inevitably fuel an increase in the base that the formula relies on...

Not that this particular formula is affecting me - my local altnet (for local people) provider gave 24 month contracts as standard (12 available but cost more per month). Their new contracts are on slightly different pricing so if I were to enter a contract for the same service today, it would cost (about 5-6%) more than the one I entered into 15 months ago for the same service, however when it comes to renewal, it looks like they offer a discount for loyalty (presumably because there is no marketing cost involved in attracting a new customer).

In my lucky case - I was going to upgrade speed by 60%, expecting to pay 7% more but actually I'm paying 10% less (having still upgraded by 60%) - Win!

I wonder if this is more of a disease affecting larger ISPs?

In reply to a post by hunnymonster:

Surely it is something that would (or should?) come under the terms of unfair contract legislation?

What is unfair about it? The clause is there in the contact - fully defined and a potential customer can (should) read it.

In reply to a post by MHC:

What is unfair about it? The clause is there in the contact - fully defined and a potential customer can (should) read it.

Most people don't read the contract (although some of us do) and complain when the prices rise in line with the terms of the contract, as much as I don't like their terms if I signed up and they increased the prices I wouldn't be complaining here as I would have known in advance that it was going to happen.

The thing I don't agree with is new/re-contracting customers get a better price, if they think they can justify the price increases in contract then they should charge new customers the same when they initially sign up. I know its a marketing ploy but it shows they would soon lose a lot of new customers.

In reply to a post by hunnymonster:

Surely it is something that would (or should?) come under the terms of unfair contract legislation?

The barrister I quoted earlier was clear that there is nothing in general consumer legislation that prevents mid-term price hikes. Whether there should be is a separate issue. In the particular case of telecoms prices, Ofcom rules are that if a contract change (including prices rises) are to the "material detriment" of the customer, they must be given an opportunity to leave the contract penalty-free. The examples given in the referenced Ofcom doc indicate that Ofcom would only regard it as material detriment if the possibility of increases were not fully explained at the time the contract was signed. If they were properly explained, and the customer signed anyway, then tough.

@Malwaremike

I looked through the thread you referenced (which I hadn't found, sorry, but I didn't look back that far). So far as I can see, it doesn't establish that Ofcom "agreed the principle" of the inflation+x% formula, or any other formula. Nor do the Ofcom docs you reference. They were to a consultation 10 years ago about whether any mid-term price rises, however arrived at, were fair, and resulted in the revised guidance to General Condition 9.6 which I quoted previously (that stuff about material detriment).

Ofcom don't regulate retail prices. They don't have the mandate to. It's supposed to be the market which does that. You might think that they should, but that's a political question that you should maybe raise with your MP. To blame Ofcom for the pricing policies of CPs is inappropriate.

You realise that BT Consumer also includes Plusnet and EE customers?

BT need to find investment and pay taxes from their profits..

In reply to a post by gt94sss2:

You realise that BT Consumer also includes Plusnet and EE customers?

BT need to find investment and pay taxes from their profits..

Hyperoptic need to do exactly the same regarding investment and paying taxes . Yet they still don't increase contract amounts .

I am just curious how they can operate and make a profit yet other isp's constantly change the cost of contracts by adding more to them twice a year .

I am just curious how they can operate and make a profit

They aren't. They are operating at a monster loss.

Edited by FibreBubble (Sat 08-Apr-23 16:32:03)

In reply to a post by FibreBubble:

I am just curious how they can operate and make a profit

They aren't. They are operating at a monster loss.

"Monster" that is an understatemet. 2020 - £46m, 2021 - £48m and at the end of 2021, they had just 220,000 users and Average Revenuse Per user of about £26 !

Hyper optic aren’t too bad. You don’t want to see the financial hole that some other large AltNets are currently in.

Anyway back to price rises.
Was talking to a friend, he's with 'NOW broadband', he has no price rise this year.

In reply to a post by burble:

Was talking to a friend, he's with 'NOW broadband', he has no price rise this year.

Despite being part of the Sky network the Now broadband didn’t go up, but the telephone call costs did.
https://www.choose.co.uk/news/2023/now-broadband-con...

In reply to a post by MHC:

What is unfair about it? The clause is there in the contact - fully defined and a potential customer can (should) read it.

I agree with that in principle, and it's why I never caught by PPI: I always carefully read the credit card agreements and ticked the box to opt out.

But what I see is a pretty poor show by the providers. For example, if you go to Plusnet and do an availability check, you'll see a big banner like this:

Full Fibre 145 (big print)
145Mb (big print)
estimated download speed (small print)
£29.99 (big print)
a month* (small print)
24 month contract (medium print)

and there is a drop-down you can expand to see the key features of the product, including some pricing info - the activation fee.

But that asterisk refers to some tiny text in dark grey on light grey, way at the bottom of the page, underneath "Here’s the legal bit"

I would say that the price you pay is the absolute number one key attribute of the product, and it's pretty disgraceful that they hide the true cost in this way.