Plans to ban automatic price rises linked to inflation by broadband
providers
, Three and Vodafone use pricing model that has been claimed to cause
‘substantial consumer harm’ by UK regulator
Charlie Weston
The Government is considering banning broadband and mobile phone service
providers from using a pricing model where they impose annual price
rises that are linked to the rate of inflation.
This pricing model is being used by the State’s largest telecoms
provider Eir, mobile phone giant Vodafone and rival Three Ireland.
They have changed to a system of hiking costs for consumers at the same
time every year by the rate of inflation, plus a set percentage.
Ofcom, the telecoms regulator in the UK, has moved to ban the practice,
stating that it causes “substantial consumer harm”.
Now Eamon Ryan’s Department of Communications is considering a similar
ban here, the Irish Independent can reveal.
The three Irish telecoms companies increase their prices every April by
3pc plus the rate of inflation at the end of the previous year.
This inflation-linked pricing model means Eir’s prices will go up by
7.6pc this April, with similar increases for Three Ireland and Vodafone.
Claims have been made that this is effectively price-signalling, an
illegal anti-competitive behaviour. But this has been strongly denied by
Eir, which said it adhered to industry standards and fully complied with
all regulatory requirements.
Telecoms regulator ComReg is understood to be calling on the Department
of Communications to legislate to ban the practice.
The European Court of Justice ruled in 2015 that an increase in telecoms
charges linked to the inflation rate does not allow subscribers to
withdraw from their contract.
This is because the annual inflation-linked rise is set down in
contracts, so it is not considered a breach of the contract by the
provider as in the case of a price rise that has not been indicated in
advance.
ComReg said it had no role in the setting of prices by telecoms
companies, but that it was concerned from a consumer protection
perspective about inflation-plus price rises since the practice was
introduced here in 2021. It pointed to the inability for consumers to
exit their contracts without penalty when their price is increased
during the contract.
It said that inflation-plus annual price rises created uncertainty about
the actual price increases that may occur over the lifetime of the
contract. And it was concerned that consumers would be hit with
financial penalties should they seek an early termination of their contract.
It said: “ComReg has advised DECC [the Department of Environment,
Climate and Communications] of this issue and of ComReg’s associated
concerns.
“ComReg has informed DECC of practices in other countries (including
Ofcom’s proposal) and ComReg has suggested possible options for DECC to
consider.”
Ofcom’s plan is to require the service providers to include the actual
monetary price increases in the contract and ban linking any price
increase clause to consumer price inflation.
It is understood ComReg has called on the department to make similar
changes to telecoms legislation here.
A spokesperson for the department noted that the use of price-adjustment
clauses by most providers of mobile and broadband services had become
more common in Ireland.
“The Department of the Environment, Climate and Communications is
currently assessing the use of these clauses, and is engaging with the
Commission for Communication Regulation (ComReg) and other relevant
stakeholders, with a view to achieving an appropriate and satisfactory
solution,” the spokesperson said.
The department said it was aware of Ofcom’s proposal in the UK to
require service providers to include the actual monetary price increases
in the contract and to ban linking any price increase clause to the CPI
(Consumer Price Index).
“The department is examining all options, but any proposal to legislate
to prevent retail providers from offering variable priced contracts –
based on the CPI – would require careful consideration,” it said.
It encouraged consumers to use price comparison websites to find the
best-value contract for their needs.
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https://www.independent.ie/business/personal-finance/plans-to-ban-automatic-price-rises-linked-to-inflation-by-broadband-providers/a1978976687.html?hConversionEventId=AQEAAZQF2gAmdjYwMDAwMDE4ZC1lNDM1LWIyN2QtYWY4My05Nzg5ZDIyYzA0NTfaACQwNWFhM2I1Ny1kMzRkLTRjNmUtMDAwMC0wMjFlZjNhMGJjZDTaACQ0YWJlNDRkMS1hMDZmLTQ2YTMtYWE1MS05YTk3ODRkNjNhNzXa_OrBVR1LvRzpVjd2-Tde_4TmSeCwNAoUkcdmtbL_GA&utm_campaign=IN:Daily&utm_content=zone_name&utm_medium=newsletter&utm_source=independent&utm_term=0-0&utm_testfeature=playvideo-202402260645
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