BT Group, Community Fibre/INCA, Vodafone, and Wildanet all gave evidence to the committee on social tariffs, mid-contract price rises, and promoting digital inclusion
Background: On 7 March 2023, the House of Lords Communications and Digital Committee heard evidence from broadband and mobile providers as it continues its inquiry into digital exclusion and the cost of living. Witnesses included Helen Burrows (Content and Services Policy Director at BT Group), Tim Stranack (Co-founder at Community Fibre, and Chair at INCA), Helen Wylde (CEO at Wildanet), and Paul Morris (Head of Government Affairs at Vodafone).
Mandating social tariffs: Questioning started on why uptake of social tariffs had been so low. BT explained how price isn’t the main factor preventing adoption (instead it’s a lack of interest and skills). Research was shared which found even where social tariffs had been fully funded (i.e. broadband was given for free), providers still struggled to get uptake above 30%. INCA directly commented that it’s not keen on the mandating of a social tariff, instead pointing to the innovation in tariffs that has come as a result of competition. BT explained the paradox in which a price that’s too low could lead some consumers to think the product will be of lower quality and so won’t take it (even if the features such as speed and quality are the same as more expensive ones). Nearly all witnesses flagged the complexity and work required implementing the DWP’s API to establish eligibility for such tariffs.
Making social tariffs more attractive: On removing VAT from social tariffs to make them cheaper (something Which? and other consumer groups have called for), BT and Vodafone confirmed they would both pass any savings onto consumers, but highlighted the technical challenge of doing this for some tariffs and not all. The operators also warned that removing VAT would be unlikely to move the dial much (in terms of uptake) – it’s not a big enough change for those on the very lowest incomes, for which some Government funding will be required. Vodafone went further to recognise that telcos pay higher VAT than water and energy providers, and that the tax could be hypothecated and used for instance as a source of funding to provide devices to those unable to get online.
Should Openreach provide a wholesale social tariff? Attention finally turned to whether Openreach should be providing a wholesale social tariff. Vodafone thinks so. Industry observers, however, suggested that BT’s shareholders were unlikely to want to fund it, and so again the idea that the Government will have to provide funding was mentioned. BT explained how if you reduce the amount Openreach collects (via wholesaling) then there’s less to invest in network build. It then becomes a wider question of policy objective, but as things stand is veering towards trying to achieve public policy with private money.
Mid-contract price rises for consumers: Outlining the rationale for increasing prices, BT explained how industry costs are rising quicker and faster than the rate of inflation. INCA pointed out that while some providers have chosen to freeze prices for the next two years, they are instead likely to apply them at the end of the contact – the so-called ‘loyalty penalty’. More than one witness explained the low margins enjoyed by telcos and how as such the model to incentivise investment is finely balanced. Overall, the issue of mid-contract price rises didn’t seem to concern the Lords too much.
Competition in the sector: Much was made by INCA of the role of altnets in driving innovation and creativity (including in the provision of social tariffs and funding of community hubs), and the importance of not reneging on a competitive broadband rollout. The comment was made in relation to the ‘Equinox 2’ price offer, and the confidence that altnet investors take from regulation and policy. Wildanet highlighted that it can be difficult to have a conversation with Ofcom about keeping the playing field flat and fair, claiming that Ofcom struggles with a lack of imagination.
Promoting digital inclusion: On the wider point of access for all, there was general agreement that more needs to be done to address poor uptake overall of faster services. This wasn’t really a policy priority pre-pandemic, and even now it’s not being done in a joined up way. BT suggested policymakers need to start considering the interdependencies of the sector – for instance the future of TV and broadcast given the ubiquity of of IP connected homes. In terms of equipping the population with digital skills, INCA predicted the importance of these will become less over time with the rise of voice assistants.
