The government has requested that the media regulator reassess its regulations concerning mid-contract price increases by phone companies, following O2’s unexpected announcement of a £2.50 monthly price hike.
Technology Secretary Liz Kendall described O2’s higher-than-anticipated price increase as “disappointing given the current pressures on consumers.”
“I believe we need to go further, faster. I am keen that we look at in-contract price rises again,” she stated in a letter addressed to the media regulator.
Ofcom has expressed its shared concern with the government, emphasizing that “customers who face price rises must be treated fairly by mobile providers.”
In a statement, O2 acknowledged that “price changes are never welcome, but we have been fully transparent with our customers about this change, writing directly to them and providing the right to exit without penalty if they wish.”
Ofcom has until November 7th to respond to Ms. Kendall’s letter and has indicated that it will address her specific questions shortly.
In January, new regulations were introduced to address the issue of phone and broadband providers increasing prices mid-contract without prior notice.
However, last week O2 announced plans to increase its monthly prices beyond what was initially communicated.
This was made possible because the increase was not tied to inflation, and customers are granted a 30-day window to terminate their contracts without incurring penalties, provided they continue to cover the cost of their devices.
The company maintains that it has not violated regulations and that Ofcom’s rules do not prevent providers from raising prices.
“A price increase equivalent to 8p per day is greatly outweighed by the £700m we invest each year into our mobile network, with UK consumers benefitting from an extremely competitive market and some of the lowest prices compared to international peers,” the company stated.
Ms. Kendall argued that O2 acted “against the spirit” of the regulations in her letter to Ofcom’s chief executive, Dame Melanie Dawes.
She has requested that Ofcom examine whether the 30-day switching period provides sufficient ease for consumers to transition to another provider.
“I would welcome your undertaking a rapid review on how easy it is for customers to switch providers,” she urged.
“If companies are determined to increase pricing, it is beholden on us to make sure that customers are able to go elsewhere as easily as possible.”
She has also requested an assessment of whether the January regulations provide consumers with adequate transparency regarding price increases during their contracts.
Ofcom’s rules mandate that companies inform customers, in pounds and pence, of the anticipated increase in their bills before the commencement of their contracts.
O2 initially announced that monthly prices would increase by £1.80 per month in April 2026 for existing customers.
However, the firm now states that prices will instead rise by £2.50.
Ms. Kendall has expressed her desire for phone providers to inform all customers, including those whose contracts predated the new regulations, of the exact amount by which their monthly prices will increase.
“We’ve always said fixed should mean fixed,” stated Tom MacInnes, director of policy at the Citizens Advice charity, adding that the current rule “hasn’t gone far enough to protect customers.”
“If one company is able to get away with this, other providers could follow suit,” he cautioned.
“The time has come for the regulator to banish mid-contract price rises for good.”
Meanwhile, telecoms analyst Paolo Pescatore of PP Foresight noted that UK network operators are “cash-strapped as margins are being squeezed.”
He added: “Striking the right balance between raising much-needed funds and investing in next-generation networks is never easy.”
However, he suggested that while other providers would typically follow suit by announcing similar price increases, “it seems highly unlikely that rivals will follow suit, given the consumer backlash and awareness generated thus far.”
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