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Consumers misled by advertised broadband prices

The ASA and Ofcom have produced a joint report warning that the current approach to presenting pricing in fixed broadband ads is frequently confusing and misleading

Internet service providers (ISPs) – such as BT, TalkTalk and Virgin Media – will be forced to adhere to new rules about how they present their fixed broadband price plans in television advertising, after research conducted by the Advertising Standards Authority (ASA) and regulator Ofcom found consumers frequently felt confused and misled.

The report claimed that the current approach to presenting pricing did not represent the true cost of broadband deals, examining presentation and understanding of additional pricing elements such as introductory deals, discounts, activation and delivery charges, and minimum contract lengths.

The ASA and Ofcom found that only 23% of participants in the research project correctly identified the total cost per month on first viewing of a TV spot, when asked to recall as much information about each deal as they could.

When asked the same question, 34% of the sample recalled pricing information but could only give partial or inaccurate details.

On a second viewing, 22% of participants were still unable to identify correctly the total cost per month. The ASA said that, if reflected across the total population of fixed broadband subscribers in the UK, around 4.3 million households would be unable to figure out what they would be paying.

Furthermore, 64% of those who could not calculate the total cost after two viewings thought the headline cost constituted the total cost, and that line rental did not apply. The research also found that a total of 81% of people were unable to calculate the total cost of a broadband contract, and three-quarters believed that information about one-off or on-going costs after the expiry of any introductory deals was either fairly or very unclear.

Regulatory change

With this in mind, the ASA and Ofcom said that the current approach taken by ISPs was likely to be misleading. The ASA and Ofcom will propose a new set of regulations, to be put in place from 30 May 2016.

“It’s essential we make sure people aren’t misled by pricing claims in broadband ads,” said ASA chief executive Guy Parker. “That obviously wouldn’t be good for them, but nor would it benefit broadband providers because advertising works better when it’s trusted.

“We’ll now be moving quickly, working alongside broadband providers, to clarify the presentation of price information.”

Ofcom chief executive Sharon White added: “Ofcom has taken measures to ensure customers receive accurate information on broadband speeds when they take out a contract. We’ll continue to work with industry and other regulators to ensure that customers are treated fairly and have the best possible information to make the right choices.”

Greater transparency

If agreed on, the regulations will force ISPs to stop separating out the cost of line rental, and provide all-inclusive information on upfront and monthly costs; give greater prominence to terms and conditions relating to minimum contracts and any post-discount price changes; and give greater prominence to upfront costs.

However, Cable.co.uk’s Dan Howdle cast doubt on whether or not the ASA’s proposed change would constitute a sufficiently effective solution.

“The ASA’s findings focus on line rental as the primary issue. But there are a plethora of additional hidden costs levied both during the purchase process and the lifetime of the contract.

“One-off costs such as installation, router postage and so-called ‘connection fees' must also be included in advertising if we're to properly address the issue, as should the monthly cost customers pay once the introductory period has ended.

“The only number that truly accomplishes all of that is the total cost of the contract from start to end – or, at the very least, the first-year cost including all one-offs and extras. The ASA’s recommendations stop short of enforcing complete transparency in this regard,” said Howdle.

Changes could disadvantage small ISPs and savvy shoppers

Andrew Ferguson, editor of broadband comparison site Thinkbroadband.com, also said he had concerns that – while the new rules would work well for larger providers – smaller ISPs that allow customers the freedom to choose who they use for their line rental may be disadvantaged.

He predicted a busy few months for the regulators over the summer, as there would certainly be a number of adverts that needed to be investigated. Ferguson also said more clarity on what constituted all-inclusive would be useful.

The big uncertainty is over which elements need to be added to the all-inclusive price bundle. For example, should a one-off £5.95 router delivery be factored in or just positioned as a recurring monthly cost?

“There is a danger that the new rules may mean that, for a few months of 2016, there will be a dearth of attractive broadband offers. This will be a problem for the savvy shopper, as there are those who have become adept at switching provider as their minimum contract term finishes exploiting all the offers, cashback and vouchers that are available,” added Ferguson.

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