Mobile, TV and broadband companies have been banned from making surprise price increases midway through a contract.
Many telecom firms have changed their contract terms in recent years to include price rises during a contract that were linked to inflation, often compounded by an additional 3.9 per cent each March or April.
This has frustrated many customers who are unsure about how much they will ultimately pay for their bills.
But in new deals from 17 January, providers must tell customers about any mid-contract price rises at the point of sale and “in pounds and pence”.
The regulator, Ofcom, said this will need to be set out prominently and transparently, at the point of sale and providers will need to be clear about when any changes to prices will occur.
Cristina Luna-Esteban, Ofcom’s telecoms policy director, said: “People need to have certainty about their monthly outgoings. But that’s impossible if you’re tied into a contract where the price could change based on something as hard to predict as future inflation.
“We’re stepping in on behalf of phone, broadband and pay TV customers to stamp out this practice, so people can be certain of the price they will pay, compare deals more easily and take advantage of the competitive market we have in the UK.”
The change was initially proposed in December and has been through a consultation process.
As of April, around 60 per cent of broadband and mobile customers were on contracts subject to inflation-linked price rises, according to the regulator.
Richard Neudegg, director of regulation at Uswitch.com, said: “After years of campaigning for an end to unpredictable inflation-linked mid-contract price rises with no escape for customers, Ofcom’s new rules will bring some much needed clarity and certainty.
“Finally, broadband and mobile customers will know ahead of time exactly what they will pay for the duration of a contract, making it easier for them to properly manage their finances.
“This change will allow people to make informed choices at the start of their deal instead of being at the mercy of future inflation rates that are impossible to know in advance.”
Providers including BT/EE, Plusnet and Vodafone have already adopted the “pounds and pence” model for mid-contract price rises.
However, Mr Neudegg added: “Providers have so far opted to switch to a flat-rate approach to price rises, regardless of the cost of the package, which will be harsher as a proportion for many customers who are on cheaper or even average priced contracts.
“While Ofcom’s decision means the total cost of your contract will be clear from the get go, we need to see how each provider will apply this in their pricing, so it’ll still be vital for customers to consider their options.”
Other experts said the change happening in December is still too far away.
Rocio Concha, Which? director of policy and advocacy, said: “With Ofcom calling time on these unfair price hikes, providers must stop this practice immediately. Ofcom now needs to make sure that future mid-contract price rises are set competitively.
“It’s disappointing that ‘prices may vary’ terms have not been banned. The regulator must be prepared to intervene if these ad hoc increases are used as a back door for providers to impose unpredictable price increases on customers.”
Consumers are urged to be aware the rules will only apply to new contract and for those taken from 17 January.
If you’re currently in a contract with a provider using inflation-linked price increases, you will still be subject to these until you take out a new contract with the new rules in place.
Customers coming to the end of their contracts are encouraged to shop around before committing to a new deal – and consider providers who have committed to no annual price rises.