Ofcom cracks down on inflation linked pricing

UK regulator Ofcom mandates transparent upfront pricing, shifting inflation risk from consumers to telecom providers.

Heath Gibson · Executive Manager – Industry Intelligence and Insights at NBN Australia26 July 2024Period: July 20244 min read

3.9%→

Standard 'inflation-plus' margin used by BT in 2020

Double Digit↑

Annual headline price rises reached this level by 2022

Locked

Companies covered:

Abstract

This report examines the UK telecom regulator Ofcom's decision to ban inflation-linked retail price rises, a practice that saw annual increases reach double digits by 2022. The new rules, effective January 2025, require providers to declare any mid-contract price rises upfront in absolute currency terms rather than percentages. The brief analyzes the implications of this regulatory shift for the UK market and assesses the likelihood of similar interventions by regulators in Australia and New Zealand.

Key Takeaways

Ofcom has banned inflation-linked and percentage-based mid-contract price rises to improve consumer price transparency.
Providers must now state future price increases in absolute 'pounds and pence' at the time of sale starting January 2025.
The move shifts the financial risk of inflation from consumers to telecom operators who are better equipped to manage it.

Create a free account to keep reading

stakeholder implications · PDF download

Frequently Asked Questions

Ofcom is banning all inflation-linked and percentage-based mid-contract price rises to ensure consumer transparency. Starting 17 January 2025, UK providers must declare all future price increases in absolute 'pounds and pence' at the point of sale.

The mandate moves the risk of inflation volatility from consumers to operators, who are now responsible for forecasting and absorbing cost fluctuations. This ends the practice where annual increases reached double digits by 2022 due to high headline inflation.

BT proactively transitioned away from percentage-linked price rises in January 2024 to align with the anticipated regulatory shift. Similarly, Telstra abandoned explicit CPI-linked pricing in May 2024, though their move was designed to provide more flexibility for potential price hikes.

While New Zealand wholesale prices remain pegged to inflation, there is currently no retail ban similar to the UK model. In Australia, the shift has already begun with Telstra's May 2024 policy change, signaling a move toward more discretionary pricing structures.

Ofcom cracks down on inflation linked pricing

Abstract

Key Takeaways

Frequently Asked Questions

Unlock the full report

Free

Lite

Team