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Customers of the UK’s four biggest internet service providers (ISPs) – BT, Sky, TalkTalk and Virgin Media – may be losing £2.6bn a year on unexpected broadband and line rental fees after signing up to “too good to be true” offers, according to research.
The study, conducted by London-based fibre altnet Relish and consumer website Moneymagpie.com, was released in the wake of a joint report from the Advertising Standards Authority and telecoms regulator Ofcom, which criticised ISPs for not being upfront over the true cost of their broadband packages.
The ASA report said that many consumers were effectively being tricked by headline prices and special offers for new customers that obfuscated additional pricing elements, such as activation and delivery charges, line rental, and price rises after the expiration of introductory offers.
Relish and Moneymagpie surveyed a number of users based on Broadband Genie statistics that suggest the average consumer stays with their ISP for around three years, typically after signing up for a 12-month introductory deal. After the first 12 months, Relish said, customers could end up being locked into spending as much as £156 extra per year.
Moneymagpie analysed four of the most popular broadband deals on offer today:
- an unlimited 38Mbps fibre broadband and line rental package from Sky, starting at £329 for the first 12 months
- BT’s unlimited 38Mbps Infinity broadband and line rental package, at £326 for 12 months
- TalkTalk’s unlimited 38Mbps broadband and line rental package, priced at £212 for 12 months
- Virgin Media’s unlimited 50Mbps broadband and line rental package, which costs £288 for 12 months
After the 12 months were up, Sky’s price rose to £449 for the second year, BT to £516, TalkTalk to £332, and Virgin Media to £444.
Based on market share and customer volume, Relish said that this meant that the four ISPs were between them making £2.67bn a year from additional charges. The firm did not include installation or equipment charges in its study.
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Moneymagpie founder Jasmine Birtles said it was pleasing that the ASA and Ofcom were planning to take steps to make ISPs provide clearer information.
“Our research has demonstrated that these supposed offers are not good deals. We need clarity on the true cost of a broadband package and what the deal actually means,” said Birtles.
“Relish and Moneymagpie are both supporting the move for more transparent advertising in order to make pricing breakdowns simpler and clearer, much like Ofgem has done with gas and electricity in recent times.”
Scratching the surface
Relish CMO Will Harnden said the study merely scratched the surface by taking into account only one problematic area.
“We need to work together to clean up the industry and give consumers the correct information to clearly assess the best possible deals,” he said.
In the wake of the ASA-Ofcom report, issued on 21 January 2016, the Internet Service Provider Association (ISPA) voiced concerns from its members that the research had not gone deep enough.
ISPA secretary general Nicholas Lansman welcomed the research, but called for a more detailed study.
“Price is only one factor when a consumer chooses a service, and the engagement with an advert is only one part of a purchasing decision,” he said. “We urge the ASA to consider the whole customer experience when consulting on changes to its advertising guidelines.
“Beyond adverts, ISPs provide clear information if consumers engage more closely with them – for example, by going to their website, visiting a shop, working with comparison and consumer websites or by calling the providers.
“This has not been reflected in the survey, which is based on a small sample size with some of the reviewed adverts only being shown to eight participants.”