Ofcom and the CPI + 3.9%

Ofcom in its wisdom allowed ISPs an annual increase of CPI+3.9% and much forum space has been devoted to explain the hefty rises appearing on latest bills.

Given that anyone with common sense was expecting the economic shocks now unfolding with future inflation rates now estimated at 10% I hope Ofcom is reviewing its policy.

Edited by Malwaremike (Wed 11-May-22 16:25:43)

In reply to a post by Malwaremike:

Given that anyone with common sense was expecting the economic shocks now unfolding with future interest rates now estimated at 10% I hope Ofcom is reviewing its policy.

They are, consultations underway to increase it to CPI + 5.732%. 😉

Typical UK regulator to allow that.

Is the consultation open to the public?

They are, consultations underway to increase it to CPI + 5.732%. 😉

Can back this up with receipts?

A quick Google search only gives you post! It not something which should even be joke about. When BoE is expecting greater number of households become behind on there morgages.

In reply to a post by amiga_dude:

Can back this up with receipts?

I thought the wink emoji in my post would be self explanatory, along with the ludicrous number of decimal places in the percentage.

It not first time such comment has been made in the last mouth. I can not rember who did that ("joke") in previous post this mouth.
There are people out there seriously stressing out there. I not against a joke as per say but there people justfiable getting worried about things.

My view on contact is simple. You want that commitment from someone, then price stays the same all way though contract if they have to pay ("get out of jail") charge. CPI uplift is wrong, this CPI + x.x% wrong so many levels. It all power dymanic where public have no real power over business treating like easy fools. The only way it should change during contact is if govement changes rate of VAT(Up/Down) etc.

In reply to a post by amiga_dude:

I not against a joke as per say but there people justfiable getting worried about things.

I had no idea that quip would be so controversial. I should probably hold off on my joke about gender identities then. 😉

In reply to a post by Oliver341:

I had no idea that quip would be so controversial. I should probably hold off on my joke about gender identities then. 😉

Probably best, this is a PC joke free zone 😉

Its the way you can have a cost of living price rise immediately after signing up that makes a mockery of the whole thing. Yet the prices to new customers don't go up?

I paid the price I signed up to with Plusnet for all of seven days before I was hit with the CPI increase last year. It doesn't leave a great taste in the mouth I have to say.

Yes, and you'll probably be hit again next year because most Plusnet contracts are for 18 months rather than 12 or 24 as they used to be. ISPs offering 12 months are looking more attractive even to long-standing PN customers ...

pretty much what I have been trying to say to people as well.

Ofcom claim they about using competition to improve the market, but they take away a tool from the customer, because the companies they regulated asked them to do so. What kind of regulator is that?

As you said ISPs make their choice, do they want long term commitment or the ability to wield frequent large price rises, they shouldnt be able to have both at the same time.

I've already been hit twice, June last year and April this year. At least I can recontract or migrate before the next increase.

This CPI + % wheeze is a dangerous tool which threatens severe impact now that government has forced its citizens to rely upon it for communication. Already inflation is running around 10% and the Bank of England seems no more likely to tackle it than it was a year ago when it should have acted. It's more and more likely the politicians are leaning on the bankers, but in so doing they are postponing an ever bigger crunch.

The financial Press are warning that international investors are concerned by the size of UK debt and may no longer consider Govt bonds as a secure investment = except for higher interest on their investments. Stand by for even higher interest rates = higher inflation = you can guess the rest. This from someone who remembers the mortgage rate hitting 15% some 43 years ago.

All too well. They peaked at 17.5% in Australia in the late 80's / early nineties - it was the infamous "banana republic" time there. I was a schoolboy, doing Year 11 economics so it was a useful real life case lesson. But it was truly bloody awful and I remember my family with business debt at the time, having massive issues servicing that debt.

Quite baffling how they managed to sell this to Ofcom really. If the companies are concerned that the price is too low to maintain over the duration of the contract then they should just make the price higher to begin with.

Maybe they are now considering 36 or 48 month contracts, there's really no incentive for them not to lock people into long contracts now.

Edited by Oliver341 (Tue 31-May-22 18:48:38)

I would like to know what so difficult for business when there business really is just invocing. What else do they do?

We all know they are reasion why this infrastructure exist is because them, nope.
We all know they are reasion why this infrastructure maintained is because them, nope.

I don't know, maybe I missed something as I never worked in that sector of economy, which makes invoices so difficult.

So what is Ofcom so worried about, if they go out of business?

PS how is inflation ever drop with a default of + anything. They you have it thanks to Ofcom they have created an business sector that has been primed for a Windfall Tax.

Hard to read but think I understand.

It would take far too long to explain all this as your basic premise is incorrect and your assumptions are incorrect so I'll just point you to the United States where mostly the options are only those who own their own infrastructure end to end, which they get to keep to themselves.

On the topic of inflation CPI can be negative and the +3.9 reflects ongoing and continuous infrastructure investment to manage 30-40% increased data usage each year, but given you seem to think ISPs don't own any infrastructure and apparently have no function or cost other than to resell the access network this may be lost.

In reply to a post by Malwaremike:

This CPI + % wheeze is a dangerous tool which threatens severe impact now that government has forced its citizens to rely upon it for communication. Already inflation is running around 10% and the Bank of England seems no more likely to tackle it than it was a year ago when it should have acted. It's more and more likely the politicians are leaning on the bankers, but in so doing they are postponing an ever bigger crunch.

The financial Press are warning that international investors are concerned by the size of UK debt and may no longer consider Govt bonds as a secure investment = except for higher interest on their investments. Stand by for even higher interest rates = higher inflation = you can guess the rest. This from someone who remembers the mortgage rate hitting 15% some 43 years ago.

The alternative is data caps or metered, pay for what you use. Pretty dangerous too.

From what I've read the financial press / investors largely think our currency and in turn economy is suspect because of our stubborn refusal as a nation to attribute any of our issues to the 'B' word or to try and adopt pragmatic solutions to facilitate trade in goods and services.

Can't expect the markets to take a nation seriously when its reflexive response to trade issues is distraction, excuses and pointing to epic trade wins worth at most 0.1% of GDP, where we bent over to take it because the government were desperate for press release material, rather than actually doing anything constructive.

We have years of this left as our economy at best transitions and at worst stagflates so may as well get used to it. Sterling as a reserve currency is pretty much over, it's what the people voted for apparently, and with that comes increased volatility.

In reply to a post by XGS_Is_On:

Hard to read

It wasn't just me then.

In reply to a post by XGS_Is_On:

On the topic of inflation CPI can be negative and the +3.9 reflects ongoing and continuous infrastructure investment to manage 30-40% increased data usage each year, but given you seem to think ISPs don't own any infrastructure and apparently have no function or cost other than to resell the access network this may be lost.

What infrastructure investment are making a reference towards. The largest infrastructure provider for telcoms in UK is Openreach and they keeps asking Ofcom to be allow to reduce it wholesale rates, some times it has been aproved. So when infrastructure provider reduces there wholesale we all have got a reduced price! When did that ever happen again?

They just want they cake and eat it. They want you to agree to long term contract where they increase your price by unknown amount with CPI and then +x% and if dont want to stay a "Get out jail" charges. There point where things start to look like an abusive practice. It sound like when use to say Unlimited which had a (FUP) ie set limit, the great weak Ofcom allow they get away with that as well.
Other regulators have crack down on abusive practice which have same same sort issues when Ofgem banned prices increasing during fixed term contracts. There is not reasion why Ofcom could not do same thing.

Or what am I missing, it would be great if they could enlightening us all and what it is. As said I never work telecoms sector and I really don't know. I would like to know but until it show to us otherwise what am I going to think? I dont mind being wrong but from my point reference says this is just wrong. I would like if my income where base of RPI and extra uplift of +3.9% ever year, if only.

We are not ask for cake and eat it. We want fair deal. IE first mouth it is £50 that month and on 18 month (of 18 month fixed term contract) it £50 and not £52.12/£58.43/£72.32. If can not do that way for 18 months term then dont sell for that long.

In reply to a post by amiga_dude:

What infrastructure investment are making a reference towards.

The bit in between Openreach and the Internet.

The data doesn't make its own way there and Openreach don't take it there, they hand it over to their customers at one of about a thousand exchanges in the UK. The Internet doesn't connect to those thousand exchanges so all our data needs transporting, in some cases a thousand kilometers, after a journey of as little as a few hundred metres via Openreach.

On the matter of reduced wholesale rates ISPs are sometimes tied into contracts with their suppliers and those don't change because of a rate change.

On the matter of what Ofgem might do power is both metered in most cases and subject to a price cap which is not the case for broadband.

On fair deals read the pricing and if you don't like it don't sign up, go somewhere else. The UK has one of the best value broadband markets in Europe relative to incomes and quality.

In reply to a post by XGS_Is_On:

The bit in between Openreach and the Internet.

Before broadband we used to dial in to different ISPs. All the Openreach vans aroudn here say "connecting you to your network". (You=your home, and network=your chosen internet provider).

If you're with Virgin Media it is possible you don't use any Openreach infrastructure, but it is possible VM pay Openreach for links between data centres where they need additional capacity or diverse routes.

In reply to a post by Oliver341:

Quite baffling how they managed to sell this to Ofcom really. If the companies are concerned that the price is too low to maintain over the duration of the contract then they should just make the price higher to begin with.

That's not at all the reason.

The reason for this practice is simply to make the price you pay *look lower* than it really is, at the time you sign the contract. It's to make people think they are getting a better bargain than they really are.

When people compare the price of two contracts, they look at the headline monthly rate, and possibly any up-front setup fees. But they don't work out in their heads what the total cost over the contract is, nor the average monthly rate over the contract.

So really, it's because the competition between ISPs is so cut-throat and the margins are so wafer-thin, that companies are resorting to measures which makes *their* product look 50p per month cheaper than their competitors. And once one competitor does it, all the others are forced to follow suit, or else lose business.

If Ofcom were to make companies publish their TCVs at time of order, using an assumed inflation rate of say 5%, it might help fight against this practice. But it would be simpler to fix the price for the duration of the contract. After all, why should customers have to take the double risk of a long-duration contract *and* unknown pricing?

In my opinion, the worse practice is having out-of-contract prices which are often double the in-contract prices. All the costs of setting up a connection are up-front: Openreach installation fee, supplying the router, cost of sales and marketing, credit check, billing setup. After that, providing the service is cheap. The price should *fall* at the end of the contract period, not rise.

As things stand, people who don't know when they might move house (e.g. renters) are forced either to pay through the nose, or to risk taking on a renewal contract which they might have to buy themselves out of later.

VM own their core besides some in Scotland that I think is owned by SSE. VM's network stops at Glasgow and they lease fibre to get themselves further north.

Openreach were used for simplicity and because they are the biggest wholesale access network provider.

In reply to a post by candlerb:

The reason for this practice is simply to make the price you pay *look lower* than it really is, at the time you sign the contract. It's to make people think they are getting a better bargain than they really are.

I was referring more to the arguments they were making to Ofcom. I have a hard time believing even Ofcom would sympathise with that one.

Even Zen, which made a selling point of "we might be a bit more expensive than the competition on day one, but we'll never raise your prices" have now dropped the pledge for new contracts, including regrades and house moves. They haven't said that they're going to get on the RPI +3.9% annual increase train, but I'm sure it's on the way.

In a way, it's understandable as their main supplier are increasing their prices, but I think they've underestimated just how many people signed up to them based on the price promise. A lot of people will get hit with this over the next few years as customers regrade from FTTC to FTTP services (either voluntarily as services arrive in their areas or involuntarily because copper/PSTN is being withdrawn).

Incidentally, it's put me off upgrading. I was considering going from 40/10 to 80/20 (my FritzBox reports my maximum attainable download speed in the 72Mbps range, so it'd be a decent upgrade) but will not bother until it's a bit clearer what this change actually means.

Edited by misstuned (Thu 02-Jun-22 15:06:59)

I agree that automatic inflation linked rises are a very unwelcome move from ISPs.

If you want it changed, you would be better writing to your MP asking that they request Ofcom review this and prevent price increases while customers are in any minimum contract period

Costs can increase over time, but it's fairer for customers if an ISP sets a realistic price taking this possibility into account when customers takes out new contracts.

Edited by gt94sss2 (Thu 02-Jun-22 19:27:17)