Analysis: Mid-contract price hikes may be legal, but the practice has been criticised as being unfair to consumers during a cost of living crisis
Many consumers have found of late that the cost of their broadband and phone services are going up during the term of their contracts. In 2021, a new pricing model was introduced by telecommunications providers in Ireland, allowing them to implement annual price increases based on a fixed percentage plus the annual rate of inflation, as measured by the Consumer Price Index (CPI).
For example, if a consumer signs up for a broadband package at €60 per month in March and the provider imposes an annual price increase of CPI + 3% in April, assuming inflation is 7%, the total increase would be 10%, raising the monthly cost to €66. This practice, commonly referred to as “mid-contract price hike”, is primarily employed by providers such as Eir, Vodafone, and Three, who justify the increases as necessary for continued investment in fibre broadband and 5G networks.
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From RTÉ Radio 1’s Today with Claire Byrne, Irish Independent personal finance editor Charlie Weston and Age Action’s Nat O’Connor on plans by a number of broadband and phone providers to increase prices
‘The fine print’
Mid-contract price increases are legally permitted. Many contracts contain an in-contract price-increase clause, which allows for these annual adjustments, though this is usually to be found buried in the fine print of the contract. Initially introduced to manage inflation spikes, these clauses were reinforced by a 2015 European Court of Justice ruling, which stated that price increases tied to the CPI do not entitle consumers to exit their contracts without penalty. The reasoning was that such increases are outlined in the contract, disclosed in advance, and do not constitute a breach of agreement.
Despite being legally sound, the practice has drawn criticism from politicians. Sinn Fein’s Pearse Doherty has called for a ban on inflation-linked mid-contract price hikes, while former TD Neasa Hourigan has argued that such increases are not in the best interests of consumers. The Commission for Communications Regulation (ComReg) has also voiced concerns, particularly regarding the inability of consumers to exit contracts without penalty when prices increase.
Additional concerns include uncertainty over the extent of future price hikes, financial difficulties resulting from increased costs and the penalties imposed for early contract termination. However, existing legislation prevents ComReg from prohibiting mid-contract price increases or allowing consumers to exit their agreements penalty-free when such hikes occur.
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From RTÉ Brainstorm, how competitive is the Irish broadband market
Will we see action to tackle this practice?
In the UK, the Office of Communications (Ofcom) initially sought to ban the practice altogether, but ultimately prohibited linking price increases to inflation. Instead, providers must define price hikes in specific monetary terms (‘pounds and pence’), ensuring greater transparency. The decision was based on findings that many consumers struggled to understand inflation rates like CPI, making it difficult to compare plans or anticipate future costs.
In February 2024, then Minister for the Environment, Climate, and Communications, Eamon Ryan, gave a non-committal response to parliamentary questions on the issue. He noted that telecommunications services operate in a fully liberalised market regulated by ComReg and that any legislative proposal would require careful consideration. Nearly a year later, no legislative action has been taken and concerns are mounting that this pricing model could extend to other sectors.
‘Significant’ impact for consumers
The implications of guaranteed annual price increases are significant for Irish consumers. First, the practice is considered by many to be a form of price signalling. This illegal anti-competitive practice involves making competitors aware that a company intends to increase prices. Thus, if one company knows that another is going to raise prices, they will be more likely to raise their own.
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From RTE Radio 1’s Today with Claire Byrne, what’s driving international price hikes in tea and coffee?
Secondly, these hikes exacerbate cost-of-living challenges, particularly as contracts often include a minimum annual increase of 3% in addition to inflation. Given the high levels of consumer inertia in Ireland, where many fail to switch providers despite cheaper alternatives, these compounding increases could become a long-term financial burden. While phone and broadband customers typically have switching options, consumers in other sectors, such as waste collection, may face monopolistic pricing, leading to potential price gouging.
Mid-contract price hikes are just one of many negative experiences Irish consumers face in the telecommunications sector, particularly with Eir. The broadband market in Ireland is dominated by a few major players, with low levels of customer switching.
A persistent frustration among consumers is the inability to avail of new customer pricing, effectively penalising loyalty while encouraging switching. This practice capitalises on consumer inertia, where companies can maximise profits as the cost of offering loyalty pricing exceeds the cost of keeping potential switchers.
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From RTÉ News, Eir, Ryanair and Sky are the companies most referenced by callers to consumer watchdog
As the Government continues to “monitor” (or ignore) the problem, a broader review of anti-competitive practices in the Irish telecommunications market is necessary. However, given the clear lack of political urgency, meaningful change seems unlikely.
So, what can consumers do to protect themselves? Many people are unaware of their contract status, so the first step is to check the contract end date, which is typically listed on monthly bills. If out-of-contract, consumers should compare deals and confirm whether a provider includes a price-increase clause before switching (you can ask this on the phone).
Those still in-contract must wait until 30 days before the contract ends to engage with a new provider. For those unwilling to switch, calling the provider 30 days before the contract expires and requesting cancellation often results in a retention offer from the loyalty team, which may be better than publicly advertised prices.
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From RTÉ News, there are calls for Dublin City Council to take back control of waste collection services in the capital
Recent waste collection price rises have been blamed on underlying increased costs for providers and are notified to consumers in advance. This is perfectly legal as very few are aware that they are more than likely out-of-contract with their provider.
To guarantee a fixed price for the full contract term, consumers should avoid providers known to engage in mid-contract price hiking. Finally, public pressure remains one of the most effective tools for change. If you have been negatively affected by these price increases, consider directing your concerns to the Minister for the Environment, Climate, and Communications, Darragh O’Brien. Politicians are often motivated by public discontent, and collective pressure may eventually lead to regulatory intervention.
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The views expressed here are those of the author and do not represent or reflect the views of RTÉ
