Last week, the Guardian ran a story exposing a particularly egregious, inflation-busting cash grab on the part of Britain’s six telecoms giants. You see, most telecoms contracts – from WiFi to mobile phones – have a clause baked in allowing a mid-contract price rise linked to inflation. But during the pandemic, when telecoms usage surged, inflation was at 0% – meaning the likes of Vodafone and BT were unable to capitalise on increased demand for their services as much as their shareholders might have liked.
Their solution? To revise such agreements, allowing for mid-contract price revisions in line with inflation, and a supplementary 3.9% increase to boot. Of course, post-pandemic, inflation skyrocketed – but the new charges weren’t removed. Instead, millions of customers, held in legal bondage to the six biggest telecoms companies controlling the British market, now face mid-contract price increases of up to 17.3%.
Such a stark example of ‘greedflation’ – the practice whereby companies use ‘inflation’ as an excuse for raising prices and maximising profits – is hard to deny. But what’s more galling is the toothless response from regulators. Ofcom, the UK’s telecoms regulatory authority, has no actual power to interfere with such profiteering; ‘competition’ within the market is supposedly impetus enough for operators to keep prices down.
Except it isn’t. In fact, all telecoms companies raise their rates to match one another – competitively! – as one Vodafone source confessed to Guardian reporters. “[Vodafone] didn’t want to be above BT, as this would bring undue attention,” the former insider told the paper. “But they didn’t want to go lower as it would be a missed revenue opportunity.”
While Ofcom lacks the ability to impose price caps and prevent telecoms companies from increasing rates, it can step in if the provider/s in question have “significant market power”. But as the Guardian outlines, a February investigation into mid-contract price rises resulted in no edicts about curtailing them on Ofcom’s part – nor did it explain the curiously uniform application of the 3.9% supplementary increase in a market supposedly cost-regulated by its own competitive nature.
Instead, Ofcom issued a statement. “Ofcom has repeatedly called on providers to think very carefully about whether significant price rises are justified during an exceptional period of hardship for many people,” it read. “However, in recent months, we’ve seen more providers move to an inflation-based calculation, limiting customers’ choice of contracts that are not subject to these price rises.
“We’re taking a close look at these issues to consider whether tougher protections are needed.”
We keep seeing this refrain applied to big businesses by the authorities that should be regulating them, particularly in the case of the key utilities and services that it’s almost impossible to live without: telecoms, water, energy, and so on. In the place of actual consumer protections, there are only entreaties to the moral compass of the corporation itself – something that doesn’t exist – pleading with them to ‘think very carefully’ about the impact on a public already squeezed from all sides.
Guess what? They have thought very carefully. And they’ve decided that significant price rises are more than justified in the eyes of their hungry hippo shareholders and top execs awaiting a Christmas bonus.
Meanwhile, you have the prominent economic voices like Bank of England governor Andrew Bailey and UK chancellor Jeremy Hunt still insisting it’s a rise in labour costs driving inflation. The situation has gotten so absurd that even the International Monetary Fund – not exactly a body known for lambasting large corporations or rampant late stage capitalism – recently said that corporate profiteering, not mythical worker wage increases, is primarily responsible for high inflation across Europe.
There’s a bizarre fallacy at the centre of all arguments for a ‘free’ or deregulated, privatised utilities market (free for whom?). The entire political rationalisation for such a system used to rest on the idea that competition would force key services to be cheaper, more efficient and to receive regular investment. This has patently not happened; water companies have polluted our public waterways while neglecting infrastructure to the point of collapse; energy behemoths are making record profits while sustainable energy transition projects are put on the backburner; and ‘big six’ telecoms customers suffer regular WiFi outages and shoddy service even as their mid-contract price increases kick in.
With the initial logic used to advocate for privatised services so brutally dispelled by reality, now all regulators and government can do is appeal weakly to a sense of fairness that doesn’t exist. Ironically, those pleas are knocked back by big business using the same disingenuous ‘I’m not a multi-million pound corporation, I’m baby’ rhetoric: ‘Our costs have increased too, we simply have to pass them onto the customer or watch profits fall’. You see these arguments from everyone from BP executives right down to landlords with multiple property portfolios.
The only people who can’t pass costs forward on right now are the ones who most need relief from such financial pressures: the tenants, the customers, the family with staring down the barrel of skyrocketing repayments on the lone, hefty mortgage they were persuaded to take out when interest rates had flatlined and no-one could have imagined things changing.
Short-termism has wormed its way into our economic psyche, from the governments selling off our national infrastructure for a quick payday to the mortgage brokers who assured thousands of households that low interest rates would hold steady. And with the refusal to think long term, the red tape that could have held such corporate greed back was long ago cut in order to unleash the ‘full potential’ of the free market. Now the beast has been loose too long to be put back in the cage – and it won’t stop until it’s raided the public’s pantry for every meagre scrap that’s left.
Moya Lothian-McLean is a contributing editor at Novara Media.