Don't get stung by these hidden broadband costs
1. Line rental
Most internet service providers don’t quote the cost of line rental, but this is one expense you really must take into consideration. Unless you sign up with Virgin or use mobile broadband – such as a dongle – then you will need to pay line rental in order to go online.
The cost tends to be around £11 a month, but does vary from provider-to-provider.
If you don’t have a home phoneline in place, then be aware that reactivation costs are pretty hefty.
2. Area restrictions
According to comparison service Simplifydigital, the broadband deals available in an area typically depend on whether a broadband supplier has put their own equipment into the BT telephone exchanges - a process known as ‘local loop unbundling’.
While this enables them to provide better deals, it does mean that many cheap offers you may not be available in your area.
3. Download penalties
If you like to download TV programmes, through BBC iPlayer for example, or the latest blockbusters then you could end up paying extra.
According to Broadbandchoices, internet providers tend to fall into two camps: those that allow a limited number of downloads and those that allow unlimited downloads.
The former will charge you if you exceed your limit – so if your habits change and you increasingly download content, you could end up paying a small fortune as these tend to cost between £1.25 and £2 per GB.
On the other hand, while you might be tempted to go for an unlimited option, bear in mind these are subject to ‘fair usage policy’.
This means that, should your provider feel your downloading activity is affecting the connection for other users, your own connection may be throttled to limit your ability to download.
Alternatively, your provider may upgrade your account to a more expensive package.
4. Routers and installation charges
Not all internet service providers offer free wireless routers, so be prepared to pay around £50 for this (plus P&P if you purchase online).
However, if you are prepared to sign up to a contract then your provider might throw in a router for free – although you might have to pay for the postage.
Also, when you leave your contract, you will probably have to return the router – and pay the ‘recovery’ cost. Check the small print carefully, as information about this is likely to be buried pretty deep.
Another cost to watch out for is installation. While you might expect your provider to set you up for free, this is not always the case.
While the offer of a free laptop might tempt you to take out a broadband contract, don’t forget to look at what you’re signing up for.
For example, O2 will throw in a free full-size laptop with its mobile broadband 24-month contract, which starts at £25 a month. Orange, meanwhile, is offering a free iPhone when you sign up to its home broadband plan, which starts at £60 a month.
However you should ask yourself whether signing up to a long contract is really the right option for you. And don’t forget to compare the monthly price to other deals on the market – it may turn out you can afford to buy your own laptop or iPhone with the savings if you go elsewhere.
6. Payment method
Avoid paying your broadband bill by cash or cheque – the cheapest payment method is direct debit.
7. Long contracts
Just as buying in bulk normally makes sense in, say, the supermarket, so too for broadband contracts. Most internet service providers will offer cheaper monthly rates to people prepared to sign up 12, 18 or even 24 months.
However, when it comes to broadband, a lot can change in a short amount of time. You may well regret signing up for a long contract when, 12 months in, one of your provider's competitors launches an attractive new offer.
If you need to move home or your circumstance change during the contact period, you may also face fees and penalties.
Another downside of a long contract is that your monthly bill might only be offered at a reduced amount for a limited period of time – the first six months, for example. Take the time to work out the ‘true’ cost over the period of the contact, and see how this compares to other offers around.
8. Rolling contracts
Time flies when you’re having fun. So it’s little wonder that many people don’t realise their broadband contract is coming up for renewal.
Increasingly, internet providers such as BT are introducing rolling contracts – this means that, unless you remember to phone up and cancel within a certain timeframe – you will automatically be rolled onto a new contract.
If you miss the window to cancel then you’ll face a fee for terminating your contract early.
9. Exit fee
One of the main drawbacks of signing up to a contract is that you’ll face exit penalties if you later decide to cancel and switch to a different provider.
However, if you are cancelling because of poor service, you might be able to convince your provider to waive these charges.
10. The cost of unbundling
Many cheap broadband providers manage to keep costs low by connecting customers to what is known as a ‘local loop unbundling’.
This means they can use their own equipment in the local exchange, therefore bypassing BT and saving themselves some cash – which is passed onto customers through lower monthly costs.
So far, so good. But what if you want to move to a new broadband provider? Broadbandchoices warns you face forking out because of the cost of unbundling.
11. Moving home
Divorce and starting a family remain two of the main reasons why people move home. Such events are stressful enough, let alone combined with the hassle of moving.
The last thing you want to deal with at such times is broadband. In theory, you should be able to simply move your contract over to your new property, right?
Not exactly. Most providers will charge you for this service. If you decide to cut your losses and cancel, then you’ll probably face exit fees.
12. Cost of technical help
Internet connections do have a habit of going wrong. If you need help then your first port of call will probably be your internet provider’s technical helpline.
But watch out. While the advice you’re given may well be free, the cost of the phone call won’t be. In fact, you face paying national or even premium call rates for ringing a broadband helpline.
Even if your provider offers a 0845 number, this will soon add up – especially if your technical problems are complicated.
Instead, go online to find the help you need (assuming your broadband connection works).
Other things to watch out for…
* Phone calls are not always cheaper when you buy bundled broadband, TV and home phone packages. If your landline is a lifeline, then see if you could save money by opting for a home phone-only provider.
* Many internet providers offer additional discounts and incentives if you subscribe online rather than over the phone.
* Take VAT charges into account, as most provider advertise monthly prices excluding this tax.
* Some providers offer free anti-virus and firewall protection but only for a limited time.
Invented by a Frenchman in 1954 and ironically introduced in the UK on 1 April 1973, VAT is an indirect tax levied on the value added in the production of goods and services, from primary production to final consumption and is paid by the buyer. Its levying is complex, with a number of exemptions and exclusions. For example, in the UK, VAT is payable on chocolate-covered biscuits, but not on chocolate-covered cakes and the non-VAT status of McVitie’s Jaffa Cakes was challenged in a UK court case to determine whether Jaffa Cake was a cake or a biscuit. The judge ruled that the Jaffa Cake is a cake, McVitie’s won the case and VAT is not paid on Jaffa Cakes in the UK.
Not to be confused with an early repayment charge (ERC). Exit fees are levied on top of ERCs, which are a method of clawing back lost interest on a loan repaid early. By contrast, exit fees are charged for the administrative work this entails. They are charged as flat fees, from £150 to £300. However, in January 2007, following mortgage lenders surreptitiously raising fees sometimes by fivefold, the Financial Services Authority (FSA) intervened and most mortgage lenders removed exit fees from new mortgages. If you paid exit fees on your mortgage before January 2007, you may be able to claim them back.