Three becomes latest to drop inflation-linked mid-contract price rises

From September, in line with upcoming regulations banning inflation-linked price hikes, new and upgrading Three customers will have annual price increases spelled out to them in pounds and pence at the point of sale. Three's move follows BT, which changed its price-rising practices back in January.

It means that rather than having to whip out a calculator and work out what a percentage increase in prices means to them, customers will be able to see exactly how much extra they'll pay every month during the lifetime of their contract.

To provide sufficient clarity, Three has also shared the exact price rises that it will apply to different tariffs.

They are tiered according to monthly data allowance. So, customers with 4 GB or less will see their price go up by £1 per month. Those with an allowance of 5 GB-99 GB will see an increase of £1.25, while those on 100 GB or more will pay £1.50 extra. Fixed-wireless access (FWA) customers will see annual price rises of up to £2 per month.

"Like many mobile providers, we regularly review and revise our pricing to ensure that we remain competitive and reflect the cost pressures we face as a business," said Elaine Carey, Three's chief commercial officer. "While we have always made sure annual price changes are clear and transparent to customers, we want to provide greater clarity going forward. Our unique tiered approach means any increase is fair, while ensuring our prices remain competitive."

The announcement comes less than a month after Ofcom officially banned telcos from enacting inflation-linked mid-contract price rises. The ban is due to come into force from 17 January.

The practice was thrown into sharp relief when telcos started jacking up their prices in the middle of a cost-of-living crisis. While telcos themselves are grappling with higher costs, it is not a good look at a time when household budgets have been stretched beyond breaking point.

Ofcom's subsequent investigation revealed what the vast majority of people already knew – inflation-linked price rises are hard for the average punter to calculate, which turns budgeting into a nightmare.

While clearing up confusion is commendable, there is a double-edged sword to the new pounds-and-pence method of annual price increases.

For one thing, it legitimises a practice – the mid-contract price increase – that until now has generally been considered a little shady and underhanded.

Rather than differentiate and be 'pro-consumer' by keeping prices locked for the length of a contract, telcos are probably more likely to apply mid-contract price rises when any criticism can be batted away with the justification that it is 'standard industry practice'.

There is precedent that supports this argument.

Around 10 years ago Ofcom published guidelines designed to mitigate unexpected mid-contract price rises by saying that affected customers who hadn't been given sufficient notice of the impending change could leave their telco without incurring an early termination fee. However, the guidelines at the time didn't apply to inflation-linked price rises.

With these guidelines in place, the industry carried on raising prices every year, but simply linked them to inflation. Three – which until then had upheld a promise not to impose mid-contract price rises - subsequently updated its terms and conditions and began hiking prices every May in line with inflation, because it had become standard industry practice.

So, while more clarity is welcome, now that everyone knows where they stand the likelihood is that UK consumers are stuck with mid-contract price rises for the foreseeable.