UK’s broadband firms set for £1.7bn windfall with above-inflation price rises

Exclusive: annual bill increases are often several percentage points higher than the January CPI or RPI rate

The UK’s biggest broadband providers are to benefit from an almost £2bn windfall when they push ahead with inflation-busting price increases next spring which will further fuel the cost-of-living crisis, an analysis shows.

Many of the country’s main internet providers – including the largest player BT, along with TalkTalk, Shell and Vodafone – use a mechanism to increase the cost of bills annually by the rate of inflation as measured by the consumer prices index (CPI) in January, plus 3.9%.

The Bank of England forecasts that inflation will hit 13.3% in the fourth quarter, while some analysts have warned it could top 22%, meaning the companies will benefit from almost £1.4bn in extra revenues from the next round of price rises next year, according to estimates from broadband provider Hyperoptic.

BT, which attributed the majority of sales growth between April and June to this year’s almost 10% bill hike, has already said that it will “stick the course” next year as its own costs also soar.

Virgin Media O2, the UK’s third biggest broadband provider, raised prices for customers by an average of 6.5% earlier this year.

The provider does not contractually guarantee a price rise each year – although this usually does happen – but assuming it does put up bills that would push the overall telecoms windfall above £1.7bn, according to one analyst.

This figure does not include the billions more that the telecoms companies will make by also raising prices on mobile phone contracts again next year.

“Broadband is a vital service and – now more than ever – it needs to be affordable,” said James Fredrickson, director of policy at Hyperoptic.

In June, the UK’s biggest mobile and broadband companies agreed a plan at a government-led summit to help customers struggling to pay bills, including moves to allow switching to cheaper deals without paying a penalty and offering more low-cost “social tariffs”.

Sky, the UK’s second biggest broadband provider, has launched an 18-month “price freeze” for new customers, as competition heats up with households looking to cut their telecoms bills. Unlike most of its rivals, Sky does not link its price rises to inflation, with its annual increase working out to an average of about 5% this year.

Last month, the consumer group Which? estimated that 5.7 million households faced at least one “affordability issue”, such as missing a payment or having to cancel or change a service, with their mobile, landline or broadband service in April.


Mark Sweney

The GuardianTramp

Related Content

Article image
UK's big broadband providers give 'shoddy' service – report
TalkTalk, Sky, Virgin and BT rank worst in annual customer survey by Which?

Rupert Jones

25, Mar, 2019 @12:01 AM

Article image
UK telecoms industry agrees plan to help struggling customers
Mobile and broadband firms make number of commitments amid cost of living crisis

Mark Sweney

27, Jun, 2022 @5:47 PM

Article image
How feasible is Labour's free broadband plan and part-nationalisation of BT?
UK lags behind other countries over full fibre but the election pledge raises many questions

Mark Sweney and Patrick Collinson

15, Nov, 2019 @10:56 AM

Article image
Broadband customers face up to 14% hike in bills, warns Which?
BT customers face £113 rise as providers such as EE and TalkTalk prepare controversial ‘inflation-plus’ mechanism

Mark Sweney

14, Oct, 2022 @11:01 PM

Article image
Fast broadband speeds not guaranteed by living in city centre, figures show

Research shows slowest area in London includes Barbican, next door to the City of London, while fastest is Charlton in Greenwich

Juliette Garside, telecoms correspondent

27, Mar, 2013 @8:38 PM

Article image
Broadband Britain: how fast is your connection?

Do you have a whizzy 52mbps or a dozy dialup? Help us crowdsource Britain's broadband speeds

Juliette Garside

08, May, 2012 @9:27 AM

Article image
Ofcom asks BT to slash cost of changing fibre-optic broadband provider

Regulator proposes reducing charges by as much as 80%, with new contracts reduced from a year to just one month

Juliette Garside

04, Jul, 2013 @7:50 AM

Article image
BT outage leaves 37,000 Sky customers in London without broadband or phone

TalkTalk users also hit for up to three days in busy online shopping period after suspected thieves cut fibre-optic cables

Juliette Garside, telecoms correspondent

12, Dec, 2013 @4:38 PM

Article image
Vodafone reports 50% rise in internet use as more people work from home
Coronavirus places greater demand on network in Europe as families stay indoors

Mark Sweney

18, Mar, 2020 @12:40 PM

Article image
Virgin Media offers 'quad-play' package
Television, broadband, landline phone and mobile to be offered in one package with some contracts costing £30 a month. By Mark Sweney

Mark Sweney

06, May, 2014 @8:11 AM