Hyperoptic seeks to poach customers using threat of inflation

Hyperoptic is offering a period of free broadband in a bid to win customers from its major rivals, as it warns that inflation will push up bills next year.

The UK altnet has hit out at its bigger competitors, whose mid-contract price rises tend to be linked to inflation, by warning consumers that they will end up paying more for broadband in 2023. Quite a lot more, in some cases.

“Broadband customers are set to add more than £1.4 billion to the coffers of the UK’s major broadband providers as a result of price rises coming in the new year, in the midst of the cost-of-living crisis,” Hyperoptic said, earlier this week.

Unnecessarily provocative language from the fibre builder, perhaps. But an important point nonetheless, particularly given that it warns that much of the UK population is unaware that price hikes are coming.

As many as 60% of UK consumers do not know about impending price rises, Hyperoptic said, reminding us of the results of a study of 2,000 people it published back in January. That equates to 9 million consumers, it said, at the time.

Hyperoptic may be keen to imply that the big guns are quietly planning to line their pockets on the sly next year, but the fact is that nothing has really changed; some providers, BT included, base their price rises on inflation plus anything up to 3.9%. Some do not, incidentally, but Hyperoptic doesn’t go there. With inflation having been low in recent years, this probably hasn’t been on the radar of many broadband users. But the times they are a changing.

Hyperoptic uses Goldman Sachs data from a Bloomberg report late last month to point out that bills could increase by 25% overnight come next spring, based on inflation potentially topping 22%. That adds £100 per year to the average BT customer’s broadband bill, it says.

While this is vital information for UK consumers, particularly those that do not already have it at their fingertips, it also serves as a platform for Hyperoptic to push its own service offering and pricing strategy. The firm, which has been Ofcom’s case on the subject for some months, pledges not to put up prices in the middle of customer contracts, and it – understandably – wants to publicise that.

While that pledge alone might well be enough to persuade some UK broadband users to switch provider, Hyperoptic has made a further move to encourage more to jump ship.

It is offering free broadband for up to nine months to customers switching from BT, Virgin, TalkTalk or Sky – it’s not wholly clear whether the offer applies to customers of other providers – subject to a host of T&Cs. The thinking behind it is that free broadband from Hyperoptic will offset the cost of any payments customers have to make to their previous provider to get out of their contract early.

It uses a BT customer paying £35 per month for broadband as an example. This customer’s bill over nine months would be £315, while an early release payment would come in at £153, hence the customer could save £162 by taking Hyperoptic up on its offer. It’s probably safe to assume that that particular example is the most a customer could save, but it illustrates the point and doubtless Hyperoptic will have some takers.

The only problem for many will be coverage. The Hyperoptic network covers 900,000 homes and businesses in the UK, which represents a decent growth rate, but means many will still be unable to connect. It aims to hit 2 million by the end of next year, but is still some way off matching the big guns for coverage.

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