In-Contract Price Rises Qualitative Research Project

Description

Many communications providers include annual inflation-linked in-contract price rise terms in their consumer contracts, typically in the formula of Consumer Prices Index (CPI) or Retail Prices Index (RPI) plus X% (where X is almost universally 3.9%). This, in combination with fast-rising rates of inflation, has led to large and likely unexpected price rises in 2022 and 2023 for many fixed broadband and mobile customers and for some pay TV customers. Price rises usually take effect in March or April each year and apply to all customers on contracts with relevant price rise terms, regardless of when they signed up to the contract. Providers can offer contracts with a commitment period of up to 24 months, which means that customers on contracts with price rise terms could face up to two annual price rises while they are in-contract. Ofcom want to assess the impact of these price rise terms on consumers, including on their ability to understand and choose the right deals for them and, how this in turn may impact the effective functioning of markets more generally. Our preliminary research suggests that consumer awareness and understanding of in-contract price rises, and inflation generally, is low. We would like to conduct a piece of qualitative work to explore levels of current knowledge, consumer journeys and to test potential remedies. The main objective of this piece of research is to measure the extent to which consumers understand the possible impact of in-contract price rises on their monthly payment, the extent to which they engage with these terms during the purchasing process, and whether an inability to understand the possible magnitude of a price rise will lead to them not being able to make an informed decision. We will use the research findings, alongside other evidence, to assess whether consumer harm is occurring. We would also like to test potential remedies that could facilitate better consumer awareness and understanding of annual in-contract price rises and/or address other consumer harms identified.

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