The current cost of living is pushing more people into poverty, with almost 68% of low income Universal Credit recipients already struggling to keep on top of their bills.
In 2022, alongside the energy crisis, rising inflation will also see prices rise for broadband and mobile customers by as much as 11.7%, and due to loopholes in Ofcom regulations, even in-contract customers who cannot switch away without penalty will be affected.
But while social tariffs for those on low incomes have already been made available by some of the biggest broadband providers, take-up remains low. In February 2022, Ofcom reported just 1.2% of the 4.2 million households in receipt of Universal Credit have successfully applied.
Why is take-up so low?
Ofcom said low awareness was the main reason behind the low take-up figures, with providers failing to adequately promote the tariffs. However, in addition to simply not knowing these tariffs are an option, the price comparison website, Choose, had found that some of the people who are aware of them have experienced difficulties and barriers when applying.
Some of the complaints reported on Choose include coming up against barriers including application access; the requirement to be an existing customer; processing delays causing financial difficulty; and poorly trained staff lacking knowledge of the tariffs.
Since these complaints were made BT has relaunched their social tariff from ‘BT Basic’ to ‘Home Essentials’. Improvements include an online application form with an instant eligibility check via the DWP, and BT have also recently pledged to offer the product in their high street stores.
As promising as this is, there are still unresolved issues, as BT also took a step backwards by bringing in a credit check and security deposit for Home Essentials, which were not previously required.
It’s important to look at what drivers there are around self-regulation, because for example, the price difference between Home Essentials and the equivalent standard tariff from BT is noticeable, highlighting revenue as a potential issue for the low promotion of these tariffs:
Prices correct as of 4th March, 2022
BT’s social tariffs are £12.99 cheaper per month than their standard equivalents, and additionally include either 700 or unlimited anytime landline minutes too, which would ordinarily cost an additional £7.31 and £15.67 per month respectively.
It’s not surprising, then, that these reduced-price tariffs are not high on the provider’s agenda for promotion – since they are likely to be loss leaders in terms of revenue.
There is therefore little financial incentive for the market to manage social broadband access itself, because unlike the energy market where providers are supplemented with set levies, social broadband tariffs are funded by a provider’s profit margin alone. Expecting self-regulation to happen is only delaying changes that are needed to ensure people are prevented from becoming digitally excluded.
There are only a couple of social broadband tariffs available nationwide as of February 2022, with BT and KCOM offering affordable deals as part of their incumbent service provider positions and Virgin Media providing a tariff to the 15.5 million homes on their network. Other social tariffs are available via Hyperoptic, G.Network and occasionally Community Fibre, but these providers offer limited availability, and the latter two are only available in London. There is one other tariff available via job centres but this is time limited to just six months, after which point it’s withdrawn.
Realistically, that means most people will have just one or possibly two affordable broadband options available to them. So, social tariffs must be made available by all suppliers as the first step to improving take-up, which is something Ofcom already agrees with.
Not only will this ensure anyone currently connected but facing financial difficulty would have a social tariff available to them without needing to switch providers, but by the very merit of it being a market-wide requirement, would surely be one of the biggest drivers of awareness too.
However, more tariffs and more awareness of them is still not enough, as there are currently barriers to access that need to be removed, or at the very least, improved upon.
Firstly, eligibility criteria must be streamlined between providers, as things stand each provider has different requirements and this only adds confusion and uncertainty to whether or not someone is eligible.
Criteria should also be widened where necessary, for example removing the ‘zero earnings’ requirement on Universal Credit claimants, means anyone attempting to work is penalised and prevented from accessing help, or alternatively, would act as a deterrent to work for someone who was on a social tariff.
Secondly, credit checks and security deposits must be revised as it’s a questionable barrier to put up against people on low incomes who are likely needing to access a social tariff due to difficulty paying for a standard one. When the products include unlimited data and unlimited minutes, the requirement of a deposit could be managed by capping, or blocking, any out of allowance charges instead.
There should also be a set cap on pricing to avoid people having to pay more for a social tariff based on where they live. And optional phone line provision needs to be standardised to ensure inclusion and accessibility.
Social tariffs are currently being priced between £15 and £20 per month. Yet Ofcom’s own research from 2021 highlights the lowest income group are paying around 4% of their disposable monthly income on broadband, compared to all other groups paying just 1-2% of their income on broadband.
This means, for the lowest income group, to be paying an equivalent amount of their disposable income, they would need access to broadband at between just £6.50 and £13 per month. This falls even lower for Universal Credit claimants according to Ofcom’s updated report.
Before BT relaunched Home Essentials in 2021, BT Basic cost just £10.07 for copper broadband and a small calls allowance. While the relaunched tariff now includes fibre broadband and 700 minutes, the price has also increased to £15. BT’s decision to close the copper phone line network should not penalise those who are struggling to afford to stay connected.
Ofcom show that a social tariff priced at £15 would still amount to 2.7% of the disposable income of a part-time Universal Credit claimant, and 4.6% for an out of work Universal Credit claimant.
While Ofcom are clearly banging the drum a little louder in their latest affordability report, considering we’re in a cost of living crisis and they’re clearly aware of the issues that will be caused by the price hikes coming in April, they could protect people faster by taking a firmer approach.
Awareness of social broadband tariffs must be bought both into the mainstream and to the people who need to stay connected. It’s hoped over the next few months as prices continue to rise we will start to see this happen.
Lyndsey Burton is the managing director and founder of Choose, a price comparison site that’s been operating since 2003. Her personal interests take her work in the direction of ethics and fairness, writing on consumer policy and market regulation.
More information on social broadband tariffs can be found on here.