Why phone contracts are increasing by RPI and how to avoid it
In the next few weeks you might get a text or letter from your mobile provider telling you that your monthly bill is increasing.
It might only be less than a pound a month, but it can be frustrating. After all, when an operator tells you you’ll be paying a certain amount over a 24-month contract, that’s what you expect to be paying.
But operators are legally within their right to increase their monthly tariffs according to the Retail Price Index (RPI), which measures inflation.
EE has made the most headlines because it is the first to announce it will be increasing prices for any pay monthly or mobile broadband customer who has joined or upgraded their contract since 26 March 2014.
It will increase its tariffs by 4.1% from 30 March 2018 in line with RPI. It argues that those on its most popular (unspecified) plan will only see an increase of 85p.
“Customers who are unhappy with the price increase can either do an early upgrade to a new handset, if eligible, or change to a new plan – subject to normal business rules,” said EE. “Customers may need to pay an early termination charge if they choose to cancel their contract early.”
Terms and conditions
Vodafone told Cable.co.uk that all pay monthly contracts taken out on or after 5 May 2016 would have an “annual price adjustment” in line with the RPI published by the Office for National Statistics (ONS) and will apply the change in April.
Three also told us that it will increase the price of its contracts by 4% in May 2018.
And this is all above board. The terms and conditions of your contract will outline your provider's right to increase contract prices by the rate of inflation.
Ofcom rules will only prevent operators from increasing prices during a contract by other means. If this happens then operators have to give customers 30 days' notice and they can exit their contract without penalty. If an operator reduces a customer’s voice, data or text allowance this is also regarded as a price increase.
So how do you minimise the risk?
Well you could sign up for one of O2’s Refresh plans, which separate the cost of the handset from the ‘airtime’ allowances of calls, texts and data. O2 will also increase customer contracts according to RPI, but only for the airtime component of the contract – not the handset. O2 estimates this will save subscribers up to £2.4m a year.
But the easiest way is to sign up with Tesco Mobile, which has promised not to increase its prices, even by the rate of inflation.
You can get 1GB of data, 250 minutes and 5,000 texts for £7.50 a month on a SIM only basis, or you can get 6GB, 1,500 minutes and 5,000 texts for £12.50 a month. If you need more data, you can get 12GB for £16.50 a month or 20GB for £19.50 a month.
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