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Broadband companies inflict a 'loyalty penalty' on non-switchers

by Mark Tyson on 11 April 2017, 11:01

Tags: British Telecom (LON:BT.A), Virgin (NASDAQ:VMED), Ofcom, Sky

Quick Link: HEXUS.net/qadgah

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Citizens Advice warns that UK broadband customers often face a 'loyalty penalty' if they stay with their current provider after the initial contract period is over. Summing it up in financial terms, people face "an average price rise of £113 a year once their deal ends," says the UK national charity. According to research by the organisation, over a third of customers don't realise these price hikes will occur.

Keeping in mind that the average customer stays with the same broadband provider for four years, Citizens Advice has compiled the table below highlighting the 'loyalty penalty' very clearly for the big 5 providers.

Provider  & cheapest basic broadband deal

Monthly tariff during fixed contract period

Monthly tariff after fixed contract period

% increase

Monthly difference

The annual loyalty penalty

 The loyalty penalty over 4 years

BT 12 month

£24.49

£40.99

67%

£16.50

£198.00

£594

Virgin Media 12 month

£32.25

£32.25

0%

£0.00

£0.00

£0.00

Talk Talk 24 month

£20.00

£25.50

28%

£5.50

£66.00

£132

Sky 12 month

£18.99

£28.99

53%

£10.00

£120.00

£360

EE 18 month

£21.00

£28.50

36%

£7.50

£90.00

£225

 

You can see above that BT is the most aggressive player - in maximising its income from an introductory pricing bait-and-switch technique. Customers that stay loyal to BT, after an introductory low-price offer, face an eye-watering 67 per cent price increase. With provider switching inertia most would let these direct debits run for about 4 years before switching to a new deal - thus paying out about £600 more for bills than they would have needed to reckons Citizens Advice.

Several fibre broadband deals on offer today - deals don't show end of contract pricing.

Previous Ofcom studies have found that older and lower income families are less likely to switch broadband and telephone providers. Citizens Advice would like Ofcom and the government to do more to pressure broadband companies to implement fairer pricing, like it has done with other home utility services.

To help people realise when their contract pricing is changing Citizens Advice suggests up-front information in advertising, not just in T&Cs, plus communications like texts when introductory pricing ends.

"Loyal broadband customers are being stung by big price rises once their fixed deal ends," asserted Gillian Guy, chief executive of Citizens Advice. "These extra costs can run into hundreds of pounds," she warned.



HEXUS Forums :: 23 Comments

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it's the same with mobile phone and cable/satellite tv packages too. possibly other things. it's a joke that different customers pay different prices for the same thing depending on how much they blag a retention deal. you can get 75% off sky plus £100 credit for example
This is an issue in the US as well and with most services that require a monthly access. They offer a lower access cost to get the person into their service. The hope is once they have them they will not want the hassle of switching.
If we could switch, we would….
In BT's Defence if you login to MyBT they have offers close to the end of your agreement that are very good. I have just renewed with them and saved £12 month off my already discounted package. Total savings of £18.50 month
Every time my contract is coming to an end I just simply ring up talktalk and they just adjust it to a better price ! I did this six weeks ago as they were going to increase from £34 to £42. I now pay £32 for my unlimited 38mb fibre with free anytime phone calls not just weekend and and small upgrade for my mobile .
I just ask nicely :)