By now, you’ll have seen that Ofcom have banned inflation-linked prices rises during the contract term for “customers.”
Ofcom’s PR machine deliberately misleading the public as to the scope of the rule change (it only applies to consumer and small business, not all telecommunications contracts) aside, Simwood has been vexed by the topic for some time (as you may recall from this blog).
In December 2022, we wrote to the then minister, pointing out the egregious ticking time bomb that was CPI (or even RPI in some cases) + 3.9% during record high inflation, and even suggested that the Government should revoke the Crown Guarantee of BT’s pension pot if they went through with it. After all, why should the British taxpayer be underwriting the liabilities of a company that’s simultaneously taking the lion’s share of those citizens (due to their dominant looking market position) for a 12.5% increase while locked into their contract?
Suffice to say the Minister wasn’t going near the hot potato of the Crown Guarantee, but did make it as clear as a sunny day she was not happy, and that action would be taken – inferring that if Ofcom didn’t do the job, the Government might step in using consumer protection legislation.
Thankfully, that step wasn’t necessary. There is some collateral damage on contracts with small businesses, where input costs can be indexed to a percentage by way of charge control, but the contract has to express steps in a fixed currency amount, meaning the retailer carries some risk/reward over what can be a 3-5 year term, but we have faith that our customers will readily adapt and we stand ready to assist you by providing medium to long term pricing certainty on various elements of our portfolio in return for various commitments
We genuinely believe that, while there is some adjustment needed in the business sector, this step is an important one in protecting the integrity of our industry in the eyes of the public. One look at consumer forums shows the damage done by the BTs and Vodafones of this world to our collective reputation. One piece of dirty laundry down – just the veritable skid-mark encrusted origin surcharges to go!
