Eir, Three and Vodafone use pricing model that has been claimed to cause ‘substantial consumer harm’ by UK regulator

The Government is considering banning broadband and mobile phone service providers from using a pricing model where they impose annual price rises that are linked to the rate of inflation.

This pricing model is being used by the State’s largest telecoms provider Eir, mobile phone giant Vodafone and rival Three Ireland.

They have changed to a system of hiking costs for consumers at the same time every year by the rate of inflation, plus a set percentage.

Ofcom, the telecoms regulator in the UK, has moved to ban the practice, stating that it causes “substantial consumer harm”.

Now Eamon Ryan’s Department of Communications is considering a similar ban here, the Irish Independent can reveal.

The three Irish telecoms companies increase their prices every April by 3pc plus the rate of inflation at the end of the previous year.

This inflation-linked pricing model means Eir’s prices will go up by 7.6pc this April, with similar increases for Three Ireland and Vodafone.

This inflation-linked pricing model means Eir’s prices will go up by 7.6pc this April, with similar increases for Three Ireland and Vodafone.

ComReg said it had no role in the setting of prices by telecoms companies, but that it was concerned from a consumer protection perspective about inflation-plus price rises since the practice was introduced here in 2021. It pointed to the inability for consumers to exit their contracts without penalty when their price is increased during the contract.

It said that inflation-plus annual price rises created uncertainty about the actual price increases that may occur over the lifetime of the contract. And it was concerned that consumers would be hit with financial penalties should they seek an early termination of their contract.

It said: “ComReg has advised DECC [the Department of Environment, Climate and Communications] of this issue and of ComReg’s associated concerns.

“ComReg has informed DECC of practices in other countries (including Ofcom’s proposal) and ComReg has suggested possible options for DECC to consider.”

Ofcom’s plan is to require the service providers to include the actual monetary price increases in the contract and ban linking any price increase clause to consumer price inflation.

It is understood ComReg has called on the department to make similar changes to telecoms legislation here.

A spokesperson for the department noted that the use of price-adjustment clauses by most providers of mobile and broadband services had become more common in Ireland.

“The Department of the Environment, Climate and Communications is currently assessing the use of these clauses, and is engaging with the Commission for Communication Regulation (ComReg) and other relevant stakeholders, with a view to achieving an appropriate and satisfactory solution,” the spokesperson said.

The department said it was aware of Ofcom’s proposal in the UK to require service providers to include the actual monetary price increases in the contract and to ban linking any price increase clause to the CPI (Consumer Price Index).

“The department is examining all options, but any proposal to legislate to prevent retail providers from offering variable priced contracts – based on the CPI – would require careful consideration,” it said.

It encouraged consumers to use price comparison websites to find the best-­value contract for their needs.

Reporting On:independent.ie