Cost of broadband on the rise
Providers are hiking up the price of their broadband-only deals to force consumers into signing up to bundled deals, according to a leading comparison site.
New research from Ofcom-accredited Broadbandchoices.co.uk has revealed that the cost of standalone broadband has risen for the first time in five years. Broadband now costs the average household £126.49 a year, up from £114.18 the previous year.
Previously prices have fallen each year since 2007.
Broadbandchoices.co.uk compared the average total first year cost of the 10 cheapest standalone broadband packages from January 2007 through to January 2011.
It found costs have risen by 11%, twice the rate of inflation.
Michael Phillips, product director at Broadbandchoices.co.uk, says it is disappointing to see the cost of stand-alone broadband increase after so many years of broadband providers delivering price cuts to consumers.
"The VAT rise and effects of inflation are taking their toll, but providers are clearly placing a premium on broadband-only deals in their drive to sign up more customers to their bundled packages," he says.
Philips says bundles for broadband, home phone, digital TV and mobile phone services do offer excellent value to consumers but those customers who want a broadband-only deal should not be penalised.
"Broadband has become an essential utility to the majority of households across the UK and if prices continue to rise we may see a worrying downward trend in broadband subscription across the country - denying access to essential information, communication and financial services that many consumers now rely upon to conduct their lives," he adds.
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.
An increase in the general level of prices that persists over a period of time. The inflation rate is a measure of the average change over a period, usually 12 months. If inflation is up 4%, this means the price of products and services is 4% higher than a year earlier, requiring we spend and extra 4% to buy the same things we bought 12 months ago and that any savings and investments must generate 4% (after any taxes) to keep pace with inflation. Since 2003, the Bank of England has used the consumer prices index (CPI) as its official measure of inflation (see also retail prices index).