Social tarfifs offer discounted broadband deals to low-income families. Image: Pixabay
A broadband provider is calling for an end to exit fees and above-inflation price rises to be scrapped to help UK customers deal with the cost of living crisis.
Cuckoo CEO Alex Fitzgerald said millions of internet users are stuck in a “price prison” due to annual price rises of nearly 10 per cent. His company is calling on the Treasury to end the tax on broadband, which is higher than any other utility such as energy or water.
The wholesale price of broadband hasn’t changed in two decades, yet last month six of the eight major providers – BT, EE, TalkTalk, Vodafone, Plusnet and John Lewis Broadband – increased their prices by between 8.2 per cent and 9.3 per cent, depending on when customers signed up.
Fitzgerald told The Big Issue: “Some of the providers try to explain away these price hikes as necessary increases to invest in network improvements – but millions of people around the country are facing the worst cost of living crisis for decades. We think to hike up people’s bills at this time – particularly given that the wholesale cost of broadband has not increased in decades – is completely unfair.”
Currently, 34 per cent of the country’s most deprived citizens say they are finding it difficult or very difficult to afford everyday expenses – an increase of 8 per cent since the Office for National Statistic’s last report.
Extortionate exit penalties of up to £450 pose another unexpected expense if customers try to opt out early of a broadband contract, to try and find a cheaper deal, with most contracts lasting at least 18 months.
Cuckoo reports that price rises will cost UK households more than £100million a month, or £1.3billion a year.
Fitzgerald adds: “Most broadband customers are tied into long contracts. Many won’t have read the small print properly and won’t realise they face an annual increase tied to the Consumer Prices Index with another 4 per cent whacked on top.
“Then when they do realise and try to leave for a better deal, they run into the brick wall of exit fees. These can be hundreds of pounds. Broadband firms use opaque methods to calculate the fees – meaning customers aren’t sure of how much they could have to fork out.
“It’s the rises combined with the exit fees trap that is so unfair. It’s going to hurt the poorest the worst but others will be affected. It will hurt those who are just about managing and it will hurt those on middle incomes.
“The pandemic has had a terrible impact on digital poverty. We want to raise customers’ awareness of these shady industry tactics and pressure the major providers to change.”
Around two million households struggle to afford broadband and smartphone services, Ofgem analysis showed. As many as 300,000 families were disconnected from the internet between 2020 and 2021 as a result of being in arrears.
In addition, last week, consumer advice service Which? reported 4.2 million households could halve their broadband bills with discounted packages, and save £144 on annual broadband bills through social tariffs, according to telecoms regulator Ofcom.
Whereas a typical broadband package costs £27 a month, equating to 8.3 per cent of the monthly disposable income of someone claiming unemployment benefits, a £15 social tariff could almost halve the impact, cutting it to almost 4.6 per cent of their disposable income.
Cuckoo is yet to introduce a social tariff to help the most disadvantaged, but its campaign to end the broadband tax is backed by MPs Dehenna Davidson, Tom Tugendhat and Tracey Crouch.
Under Jeremy Corbyn’s leadership, the Labour Party pledged free broadband for all in its 2019 election manifesto.
Fitzgerald adds: “Our core principle is offering fair prices for all – 27 per cent of the poorest households in the UK don’t have an internet connection. Compare that to 3 per cent of the richest. It’s even worse when you look at the regional disparity. Relative to average incomes, the poorest households in the north spend three times as much as Londoners on broadband.”
Jonathan Gullis, MP for Stoke-on-Trent MP said: “Hard pressed families in areas like Stoke spend three times as much of their disposable income on broadband compared to richer families in London. If the government cuts the broadband tax, recognising it as a necessity not a luxury, it would be a real boost to families across the north. This has been made even more important by the pandemic.”
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