Virgin Media O2 UK May Adopt Inflation Busting Price Hikes by 2024
Sources have indicated to ISPreview that broadband customers of UK ISP Virgin Media (VMO2) might face bigger price hikes in the future than usual, with the provider being tipped to adopt the same annual style of inflation busting RPI + 3.9% hikes as those of their mobile base (e.g. O2 sims).
In recent years, much of the fixed broadband, mobile and phone market – at least among the biggest telecoms providers – has switched to adopt price increases linked to inflation. In this model, a provider increases its prices by a measure of either the annualised Retail Price Index (RPI) or Consumer Price Index (CPI) plus a set amount on top, which is usually 3.9% (the total increase usually reflects an average across all of their products).
For example, the latest CPI rate is 10.7% and RPI is 14%, thus an operator that chooses to increase its prices by RPI + 3.9% today would be raising them by an average of 17.9%! But it’s worth noting how most broadband providers that adopt this approach use CPI and not RPI (i.e. using RPI on broadband is not a good look).
By comparison, Virgin Media has tended to buck this trend on their fixed line base and, as a result, last year’s annual increase was distinctly less aggressive than some of their closest rivals (here). But it should be said that their mobile customers already suffer from the RPI + 3.9% method (here). However, normally credible sources have now informed us that this may change in 2024.
Assuming the ISP follows the same trend in 2023 as they did in 2022, then we expect their usual round of annual price hikes to be announced in January or February 2023. But this may also give notice of their FUTURE intention to update the terms of their packages to adopt the RPI + 3.9% approach for their broadband base.
The change, which could then become effective for all customers on 1st May 2023, would mean that the price hikes introduced from 1st April 2024 (i.e. the following year) would be based off the RPI rate published in February 2024, plus 3.9% on top. The good news is that we’re expecting inflation to fall significantly by February 2024, although there’s still a high level of uncertainty over those forecasts.
As we’ve mentioned before, adopting the CPI/RPI + 3.X% method does have the benefit of giving customers more transparency over future price increases, but that same transparency also makes it harder to exit your contract penalty free (i.e. Ofcom’s rule against mid-contract price hikes ceases to be much help). On top of that, many consumers don’t understand how the inflation linked price increases even work.
A VMO2 spokesperson told ISPreview.co.uk:
“We’re not confirming any pricing changes and if we do change prices then we’ll communicate directly to customers in an open and transparent way”
At this point it’s worth highlighting that the UK advertising watchdog is currently considering new guidance, which could require information about mid-contract prices hikes to be more prominently stated in future ads (here). In any case, we’ll know whether VMO2 intend to implement the RPI + 3.9% approach sometime during the early New Year period.
Mark is a professional technology writer, IT consultant and computer engineer from Dorset (England), he also founded ISPreview in 1999 and enjoys analysing the latest telecoms and broadband developments. Find me on X (Twitter), Mastodon, Facebook and Linkedin.
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IMO consumer contracts shouldn’t be allowed to have price increases during the minimum commitment. If the seller, a business, cannot predict their future costs and factor them into the price, how can the buyer, a consumer, be expected to budget! CPI isn’t predictable — when folks signed contracts 18 or 24 months ago, nobody expected inflation to be at this level.
If sellers don’t like the idea of fixed contracts / minimum committments, they’re always welcome to sell on a “30 days notice” basis.
Completely agree.
Seems like a recent thing. I can remember many mobile phone contracts over the years that didn’t budge an inch!
If you sign a contract for a certain amount then it shouldn’t change during that period.
Quite. And it should be mandated that providers offer all of their packages on a no-commitment basis.
It’s quite ridiculous that those people who happen to want/need a larger allowance are often forced into 24/36 month mobile contracts for no justifiable reason, for example. Or that people who want Openreach FTTP are almost always forced into a 24 month contract when the same ISP will happily sell a 30 day/18 Month contract on all their other packages.
On a SIM Only, or Broadband-only contract, where there are to all intents and purposes absolutely no fixed costs involved that need to be recovered, why are they allowed to get away with holding customers hostage in long contracts with unreasonable, and largely unjustifiable, price increases?
Yes and no. One of the benefits of a price increase during your contract period is that you can end your contract early without having to pay early exit fees.
I am hoping Ofcom will actually ban mid-contract price rises. Seems the move to 18month/2 year contracts by most suppliers only happened after they could do these increases. I point blank refuse to sign up to anyone with these terms in their contracts now, plenty of MVNOs don’t have these terms, admittedly it is a bit harder for broadband.
Bye bye Virgin then. I don’t expect a price increase mid contract to an amount I didn’t agree.
It’s probably sensible from an immediate business standpoint. For those like me who have no other option if they want/need an ultrafast service, they can get away with it.
But from a longer term standpoint it’s not at all a good idea. I’m on 1gig and happy with the service (of course I want more upload but at least with D3.1 it’s better latency these days).
However, as soon as a cheaper fibre based altnet or OR comes online, which it certainly will within a year or two, I’m off.
If I can cut costs by any amount and get a better technology to boot, it’s a no brainer.
I’ve read through the comments above, but I take a different view. When I changed providers the CPI+3.9% increases were made clear to me, and if I remember correctly I was also told when the first increases would be due within the contract.
The inflation Plus mid contract price increases, were likely introduced to incorporate inflationary increases into the longer 18 and 24 month contracts, since a 12 month contract renewal would normally see inflation related increases at renewal anyway.
Currently providers are hitting customers with far higher end of contract increases than CPI+3.9%, and since it’s really easy to switch providers everyone should consider switching at the end of the contract. The inflationary price rises become less significant at contract renewal, since at that point you can change providers and move to whoever’s offering the best deal.
What you’re conveniently forgetting is that after applying compulsory price rises to all their existing customers, many of whom get them forced upon them even within a 12 month contract, that same operator will still sell the exact same product/tariff, for the old price, to new customers. If there was actually an increase in their costs, then that new customer price should increase too.
All this amounts to is the operators taking advantage of locking people into long contracts they often have no choice but to accept. If they were at all good at managing their costs, they should know how to forecast for a year or two or change the price to new clients to make up for any mistakes.
I don’t agree that all operators make it clear – yes, the text is there, but it isn’t always obvious and clear, and they offer no way of not accepting them. There is also the completely unacceptable practice of advertising a low price that only applies for a quarter of the contract term, and only advertising the actual price in a font size a tenth that of the low price.
Like I said, for a SIM Only contract, there is no reason at all why the operators should be allowed to force people into a 24 month contract just because they need more data allowance – there is no fixed cost for them to recover, except the cost of a SIM card and postage – maybe £2? They only force you into a long contract so that they can force unnecessary price rises on you, and force you to move operator or accept new, often not as good, terms or tariffs when you are forced to renegotiate back down to the price they are actually willing to offer the service for.
> that same operator will still sell the exact same product/tariff, for the old price, to new customers. If there was actually an increase in their costs, then that new customer price should increase too.
Exactly. It’s not due to rising cost base: it’s simply a gimmick to make the headline figure, that you see when you sign up, look lower than the actual price you’ll end up paying.
The true cost would be the average over the contract duration, but since CPI isn’t known in advance, this conveniently excuses them from having to show the true price in their advertising.
In a cut-throat market where even a 50p per month difference is enough to make people switch, I can sort-of understand why they do it. But I don’t think it should be allowed: firstly because it is a deceptive practice, and secondly because it puts an unfair risk on consumers, entering a contract to buy something at an unknown price.
“The inflation Plus mid contract price increases, were likely introduced to incorporate inflationary increases into the longer 18 and 24 month contracts, since a 12 month contract renewal would normally see inflation related increases at renewal anyway.”
Except several of the ISPs I’ve looked at have minimum contracts of 18-24 month with no option for shorter contracts.
So if this was PURELY the reason for the mid-contract increases they should IMO be offering shorter contracts, even if they’re something like Cuckoo or Now where you can either pay for activation or 12 month commitment.
Another point is: if the contract were fixed price at £40 a month, it’ll be unlawful to advertise it as £33 month. Yet ISPs are getting away with being that misleading, by pretending their products have to be variably priced.
“if this was PURELY the reason for the mid-contract increases they should IMO be offering shorter contracts, even if they’re something like Cuckoo or Now where you can either pay for activation or 12 month commitment”
We all have opinions about this and the answer is easy, if you don’t like it look for a provider who locks the price over the full term of the contract, assuming you can find one offering that in their T&C’s. The calculation isn’t difficult, so you can factor in the CPI+3.9% increases when choosing a provider. Reading some of the posts on here, it’s almost as though some are suggesting they’d rather pay more for a service where CPI+3.9% isn’t applied, which could be likened to cutting your nose off to spite your face.
When my contract comes up for renewal, first i’ll renegotiate with my current provider and if they can’t offer me a competitive deal, I’ll look elsewhere for the best deal I can find and switch.
As long as people are advised on the CPI+3.9% increases, in a clear and understandable way, then they can’t complain when the increases come through. Just because inflation is over 10% doesn’t change the rule when price increases come through, since the providers are equally affected by inflation.
@Ex Telecom Engineer
I actually did this myself and avoided several ISPs because of it, although I’ve noticed the choice shrinking over time.
My argument though was more about how it would be a rather poor excuse by ISPs given the potential reason you presented, because they effectively create the problem for themselves via long contracts.
> The calculation isn’t difficult, so you can factor in the CPI+3.9% increases when choosing a provider.
The calculation isn’t difficult?
Say I have a broadband bill today of £20/month with a CPI+3.9% increase baked in every November, what will I pay from November 2023?
Exact and accurate answers only please.
I may adopt a slower but cheaper alternative that does not decide to ripoff their customers
They’ve seen greedy BT be one of the first to do this style of rip-off and now wanting a slice.
Go on VM, but I will be off. The ALTNETS are weeks from completion here, the main reason I am going is I am sick of the 12/18 month haggle at end of contract. No price rises with my local ALTNET during contract and no huge increase at the end.
Only on the 1gbps service with VN due to paltry upload speeds and the 1gbps has the highest but still low at 52mbps.
ALNETS in my area are symmetric so in theory I can go for 150mbps and saves wads of cash as the upload will still be 2x better than on VM at 150mbps for one of the lowest price packages. Seeing as 1gbps is still far cheaper anyway on the ALTNET, I’ll go with that anyway.
If you don’t have certainty of costs for 24 months, don’t try to tie customers into service for 24 months.
By offering longer contracts, you have more risk of higher costs.
This should be banned.
It should either be a) stay on a variable rate or b) stay on a locked price for a period of time, just like on energy contracts
Greedy pigs want to lock people into as long as possible but also want the freedom to hike their prices
Currently with VM on 1GB Volt plan at £ 80/month. The deal is great as I use all the products in the bundle. Having said that I am really tired of paying so much a month. Having said that even if I wanted to get rid of the football the Volt plan still has at least £26 in value with Netflix Standard (worth £10.99/month) and the O2 SIM (say worth £15/month). So £80-£26=£54. BT FTTP 900mb, which I can’t currently get as Openreach has not upgrade my telegraph pole, costs £40.99. Even if I only bought BT Sport monthly pass for £ 25 that will be at £66 (and more after yearly raises) which is more than £54. However all is not list. CommunityFibre is coming to my area and their 900/900 plan is currently £27/month for 24 months which basically makes it better than VM even if I get BT Sport monthly pass for £ 25 (£52/month). I won’t have Sky Sports but I hate Sky so much so I don’t mind ditching them. So I will finally be able to leave VM once CommunityFibre can give me a service!
If mid contract price rises are going to become common practice, then what is even the point in signing up for long term contracts?? There is absolutely no benefit to the customers in signing up for 24 months, which is the duration most providers are now moving to. If this is going to become the norm, then Ofcom really needs to limit the contract term to 12 months only! Imagine signing up to BT in Jan 2021 and then getting a 13% increase followed by a 14% increase during your contract term! a £36 starting price would now be over £46 and there is nothing that can be done to change that till the contract ends