When is a deal not a deal? What to look out for in new broadband contracts
Reliable internet connection is something we all need nowadays but finding the right broadband deal is no mean feat.
Fierce competition between the industry’s providers means price comparison sites are thriving and promotional broadband offers have become all-year-round phenomena.
With seasonal promotions such as the Black Friday sales now in full swing, consumers are finding themselves bombarded with limited-time broadband deals that promise huge savings or faster internet speeds.
But all that glitters is not gold. Consumers must tread carefully to avoid getting locked into a broadband deal that looks great at the outset but hides ugly surprises when the promotion ends. After the honeymoon period often comes a price hike.
Price hikes: A third of customers are unaware they’re overpaying
In 2018, Citizens’ Advice found millions of customers were being overcharged for their broadband.
Loyal customers, who have quietly agreed to – meaning not disagreed or haggled against – increasing prices as their contract went on over the years, found they were paying in some cases £200 more than new customers who just signed up to the same speeds and services. This is called the ‘loyalty penalty’.
The study showed 36 percent of long-term broadband customers wrongly assumed they were charged the same or less than new customers. Over 65s were especially hard-hit as they are more than twice as likely as younger broadband customers to have been on the same contract for over 10 years.
Annual price hikes are nothing new in the industry. As technology advances, internet service providers (ISPs) are having to spend more money each year to upgrade their infrastructures and provide customers with ever-faster and more reliable internet connection that supports frictionless video conferencing, HD videogame streaming and cloud-based software.
And while most consumers are happy to pay more for a service that delivers more, in recent years ISPs have developed a bad reputation for increasing prices mid-contract and doing so more frequently than expected, often multiple times within a single contract term.
What to do? Know your offenders, check your contract
Last year, BT took steps to reverse this trend when it decided to link price hikes to the Consumer Price Index (CPI) rate of inflation – a welcome development – but has since angered its customer base when in September it announced a ‘sneaky’ price rise which aligns to both the CPI rate of inflation “plus an additional 3.9 percent.”
This means that if you’re a BT, EE or Plusnet customer, who signed up for a new contact or renewed since 1 September, you can expect a price hike in the spring of 2021. The exact rate of increase is not yet known – since the CPI rate is revealed in January 2021, you won’t know how much extra you will pay until then.
Not only that, but the BT policy change is not something customers can wiggle out of easily. Normally, broadband providers have to give one month’s notice in case of an unexpected price rise, allowing unhappy customers to end their contract within 30 days without paying the early termination fee. However, as BT has included this new clause in its terms and conditions, the rule set by Ofcom doesn’t apply.
Now Three and Vodafone are following suit, with price hikes effective of April 2021. MSE reports Three will raise prices by 4.5 percent for pay-monthly customers who take out a new deal or renew from 29 October 2020 onwards, while Vodafone will raise prices by CPI plus 3.9 percent – just like BT – for pay-monthly customers who take out a new deal or renew from 9 December 2020 onwards.
When looking at promotional deals, evaluate the benefits in light of this cost. If you’re still better off after factoring in price hikes, you’re likely getting a good broadband deal. But it’s not just about the money…
Avoid other types of broadband lock-in
Making sure you know what you’re taking on with a new broadband deal is just as essential as evaluating what giving up your old contract means, because the early termination fee might not be the only punishment for suddenly abandoning your current provider. Email addresses and landlines can both make customers feel locked into contracts.
This is because three out of Britain’s big four internet providers – BT, TalkTalk and Virgin – don’t allow customers to keep their broadband-affiliated email addresses after leaving, or at least not for free. As email addresses store valuable information and are used to access online platforms, it’s better to keep it separate from ISPs that provide little flexibility. If you’re one of those customers feeling compelled to stay with your provider because of email lock-in, our guide here will help you make the transition.
Landline numbers are easier to keep, as Ofcom requires broadband providers to allow customers to keep hold of it when moving to a new provider. However, as your new provider doesn’t have to accept your request to transfer the number over, it’s better to ask before switching. In the long term, moving to a VoIP (voice over internet protocol) system – involving a third-party provider – is a better option for fibre-based internet users, completely doing away with the copper phone line.
Don’t rush it!
When faced with a promotional deal that offers large savings compared to your current broadband pricing, read the small print, check the speeds involved and do the maths. Price hikes, contractual lock-ins and some ISPs’ inflexibility are easy to overlook but can make a ‘good deal’ or an impulse switch a costly decision.
After all, if it sounds too good to be true, there’s a good chance it is!