Above-inflation broadband bills damage the economy

One point you missed in Issue

650’s ‘Question of the Fortnight’ on rising broadband bills

(pictured) is that above-inflation increases are themselves inflationary. Every increased bill adds to the average person’s monthly spending, which is then fed into inflation statistics. This is what makes them deeply unfair and damaging to the economy.

I’ve heard it argued that providers have to tie their increases to inflation in order to stay in business, but that overlooks the extra 3.9 per cent they whack on top of the increase. It shouldn’t be forgotten that they implemented this policy when inflation was around two per cent. Linking it to such a low rate of inflation wouldn’t have delivered large increases every year, so they had to add more. What’s truly audacious is that the amount they added – 3.9 per cent – was double the inflation rate at the time.

There’s no point switching because all the providers, bar some small local firms, are doing the same. It’s as close to a cartel as you can get in today’s Britain. There’s also no point Ofcom threatening to ban mid-contract above-inflation rises because providers will respond by hiking bills at the start of contracts. If Ofcom told BT it can’t raise prices by 14.4 per cent in April for existing customers, it would instead make new or renewing customers pay 14.4 per cent more.

The depressing conclusion then is that a lack of competition and the relative cheapness of broadband – compared with gas and electricity – means prices have much further to rise.

Stuart Crowther