Three-quarters overspend on broadband

British families are overspending on ‘out of contract’ broadband and don’t realise it, says broadband challenger First Utility.

The Warwick-based gas and electricity supplier joined the home broadband market in summer 2017 and has already made headway with cheap broadband deals.

New analysis from First Utility shows that three quarters of us are overspending on broadband due out of contract price hikes, to the tune of £1.7bn a year.

Now First Utility is calling on Ofcom to change the rules so that ISPs will be required by law to let people know about these price hikes.

By contrast, energy providers are legally required to alert customers 49 days before the end of a contract but no such regulation exists for broadband. Research by First Utility shows that 92% of UK households would expect their broadband supplier to alert them when their initial contract price is ending.

Just 10% of those surveyed in this analysis remember being alerted to out of contract price rises.

Ofcom is currently in consultation on how best to help customers avoid paying out of contract charges.

The investigation suggests that broadband providers believe it is the customer’s responsibility to check if they are out of contract.

On average, providers increase their prices by 37% when the initial contract term of 12 or 18 months comes to an end.

That cost amounts to £1132 per year per household. This lack of transparency over contract alerts means that 72% of UK households – some 15 million homes – are paying ‘out-of contract’ rates for their broadband, costing the UK £1.7bn a year more than necessary.

First Utility has promised not to increase prices when customers are out of contract and is pushing for the same scrutiny on broadband as already exists in the energy sector.

Ed Kamm, Chief Commercial Officer, First Utility commented: “The parallels between the energy and telecoms markets are striking, with large swathes of households paying far too much for both services. It’s clear that left to their own devices, the biggest broadband suppliers – just like the Big Six energy companies – will take any opportunity to rip customers off by hiding better deals behind bamboozling T&Cs.

“As an energy supplier, we’re obliged to let our customers know when their contract is drawing to an end. We urge the industry to consider something similar to help empower their customers and support engagement.

“Broadband is lagging behind many sectors and proving to be among the worst industries for customer communication. It’s about time it caught up and formalised the process of communicating out-of-contract plans with customers.”