HomeFinancial/RegulationBT looks to seize pricing high ground ahead of rivals' rises, Ofcom...

    BT looks to seize pricing high ground ahead of rivals’ rises, Ofcom ruling


    Operators says it will move away from controversial inflation-linked price rises during contracts, spelling out price rises in pounds and pence, as proposed by Ofcom

    Marc Allera, CEO of BT Group’s Consumer division, has written a blog saying the operator will drop inflation-linked price rises during customers’ contracts. BT has used the model introduced as part of Ofcom’s Fairness for Customers commitments in 2019. It allows operators to increase prices to customers every year, on 31st March, by the rate of inflation (CPI) +3.9%.

    BT/EE experienced perhaps a much bigger backlash than expected when it hiked prices for mobile and fixed line by 14.4% last year. It and others were accused of using rocketing inflation to “line their pockets” while people struggled with the cost of living crisis. Other operators were treated to a similar public roasting for increasing their prices.

    BT/EE arrived at this figure by taking the December consumer price index inflation rate for December 2022 plus 3.9%, in keeping with the regulation.

    Voluntary action ahead of ruling

    Regulator Ofcom proposed a new approach at the end of last year, whereby operators must spell out what the price rise will be, in pence and pounds, when the contract is signed. Allera writes, “We’re listening, and we’ve taken this on board”. After consulting further, Ofcom is due to publish its ruling in the next month.

    Kester Mann, Director, Consumer and Connectivity, CCS Insight, comments, “This is a smart move from BT, anticipating the likely ban on inflation-linked pricing after Ofcom opened a consultation into the controversial practice late last year. It gives the operator a short window to promote a clearer and more transparent approach compared to its rivals before most other operators inevitably follow suit.”

    Timing is all

    He also noted that BT’s announcement comes less than 24 hours before many UK operators confirm their annual price increases for 2024. “This is a delicate topic as households continue to grapple with cost-of-living concerns. Operators need to tread carefully: in CCS Insight’s consumer research last month, nearly three-quarters of people said they would consider acting if their mobile or broadband bill went up again this year,” Mann added.

    With little time to react, the ball is now in its rivals’ court. Mann thinks some will quickly follow BT’s lead. The timing is especially tricky for wanna-be merger partners, Vodafone and Three. Mann says their pricing will be scrutinised by the competition watchdog as part of the upcoming investigation into their planned merger.