Broadband firms ‘over-charge’ to cope with customers leaving

There’s a crucial flaw in Hyperoptic asking Ofcom to investigate broadband providers who include mid-contract price rises above the rate of inflation (‘Question of the Fortnight’, Issue 630). If

Ofcom does this, it will just force the companies affected to find other ways to pass on costs to us.

As you mention in your introduction to the piece, industry regulation can backfire. Any company faced with the prospect of not being able to increase its bills in line with inflation would simply increase the amount you have to pay at the beginning of your contract, or charge more for installation. Hyperoptic seems to be saying that to counteract regulation you need even more regulation.

My own experience of working in the broadband industry is that providers know they are so vulnerable to people haggling that they have to ‘over-charge’ for their service to protect them from losing customers. I retired about six years ago, but worked for one of the bigger firms. We didn’t mind regulation because we knew we’d be able to cope with it better than smaller firms chasing our business. Also, we always knew we could keep increasing prices, as long as our policy on haggling was flexible enough to keep customers who were looking to switch.

As a businessman, I accepted the inevitability of regulation, and even welcomed it sometimes. But now I’m just a customer (albeit with industry background), I see little reason for it. It may seem counter-intuitive, but price rises will only decline when regulation eases and companies are allowed to compete more dynamically with each other. David Thomson