3 UK Revokes Promise of No Mid-Contract Price Increases

Mobile operator 3 UK has recently informed consumers that it will not be upholding its commitment not to increase prices mid-contract for customers who have taken out a new contract or upgraded an existing one after 29 May 2015. These subscribers are being told the following: “Each May, your monthly package price will increase by an amount up to the retail price index (RPI) rate, published in February that year.” A 3 spokesperson elaborated that the operator’s new terms and conditions, which are being introduced this year, will be made clear to subscribers when they enter into their new contracts, and that subscribers will see their first RPI increase in May 2016. The institution of this new price increase by 3 leaves Vodafone as the only U.K. operator that is not raising its prices mid-contract.

This announcement from 3 is quite different from the original pledge it made in January 2014 in response to the guidelines of Ofcom, the U.K. regulator, which were intended to prevent fixed and mobile operators from increasing prices while customers were still within their contract period. Even with Ofcom’s one caveat, which allowed operators to impose increases based on inflation seen in the RPI, at the time 3 UK took a pro-consumer stance with regard to increases that could be made based on this index. Whether 3’s about-face on this point will have a negative effect on the operator through churn remains to be seen, particularly because other operators in the U.K. have mid-contract price increases. In 3’s case we cannot help but wonder if its recent acquisition of O2 in the U.K. played a role in bringing about the implementation of mid-contract price increases. While this merger will make 3 the largest operator in the U.K., it no doubt placed a financial burden on it. What is certain, however, is that a business will not hesitate to do what is necessary to react to changes in the economy no matter what type of price commitment it makes.

The above item appeared in a recent issue of The Tarifica Alert, a weekly resource that analyzes noteworthy developments in the telecoms industry from around the world. Contact Tarifica for a subscription to the Tarifica Alert. 
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