By Simon Woodhead
Given the ongoing cost of living crisis, I’d like to shine the spotlight on another of this industry’s dirty little secrets. It isn’t our secret, we’ve never played along, but you and your customers should be aware before the TV ads start lying or virtue signalling. We hope by giving a decent run up there’s time for objection to gather some steam and, indeed, will be writing to the powers that be ourselves.
So, break out your Google-machine and type in “CPI+3.9%” or click here. Maybe scroll forward a few pages. Behold the extent to which competition is working in this sector!
Yes, you read it right. When even decent earners are struggling to make ends meet, the largest telco in the UK is likely to massively increase its retail prices. This is something they do “each year” according to their own web site.
CPI is running at 8.6% according to the August ONS statistics. So if their rise were to come in now we’d be looking at a 12.5% increase in bills at a time when society needs it least. I’m not sure whether it’ll be much more welcome next March or indeed where CPI will be then.
So consumers can vote with their feet right? Well not as easily as you might think, because BT’s large competitors all seem to follow suit, and at some level, many perceived competitors are just resellers so have little choice but to follow. Well there’s always a choice of course but lets say they usually opt for passing the increase on rather than demonstrating they have a spine.
I don’t want to throw the phrase ‘price fixing’ out there because whilst this may appear like an entire industry colluding, I don’t think it is, and in practice it is instead a function of oligopoly and spineless leadership. There is a technical term for this – “Joint Dominance” – and it is what the economists use to describe herd pricing behaviour due to a lack of effective competition – something we’ve provided evidence of to our sector’s regulator, to which the response was tumbleweed.
In certain parts of our industry, especially in residential retail telecommunications, competition is neither real nor working in this industry and, as I’ve said many many times, we’re on a fast road to remonopolisation. Ofcom has been told and shown this many times and in my opinion based on experience acts to preserve the oligopoly. Westminster has been told too.
Speaking of Ofcom, their efforts to regulate telecoms pricing are largely at the wholesale layer as I’ve criticised before (not least in 2014 when they acted upon an EU Recommendation and took away 86% of our revenue and gave it to BT and made every call on every number ported from BT loss-making from that point to this day). Those annual revisions to fixed and mobile termination rates (FTR and MTR respectively) have always gone down until this year. Starting 2023 mobile rates will see CPI+2.1%, CPI+2.4% and then CPI+1.5% in 2025. Fixed line rates will be CPI+0%. So yes, you guessed it, the above profiteering aside, everyone including us will be seeing a large increase to input costs next year as a direct result of Regulation and the CPI premium. Take a guess who the main beneficiaries of that will be…
And all the time this is going on, the British taxpayer continues to this day to underwrite BT’s pension scheme with a Crown Guarantee. Yep, you read that right – the taxpayer is subsidising the very entity that, through retail and wholesale CPI shenanigans could be hiking prices to the very same taxpayer.
There’s plenty of time for Ofcom, DCMS or indeed the Government to step in and hit BT with a big stick before this happens again and consumers are pillaged. There’s plenty of time for our media to pick up on this too. There’s also plenty of time for people to switch away from the oligopoly.
For the record, Simwood has never played the blanket CPI+ price rise game and won’t be joining in this year. We will be reviewing our prices as some of our own costs increase massively but we’re committed to doing so infrequently and fairly. As a very wise mentor of mine once said: you make your money on the buy price, because the market sets the sell price. Where we can control things internally, we will continue to do so, and we’ll announce where we can’t in due course. That might mean some things increase more than CPI+3.9% after many years of not changing at all, others may go down, and still others will continue to not change at all; I say that before some smarty pants re-quotes this to future me!