Opinion | Inflation-based price adjustments

 

Dear Readers,

In this latest blog post of Sincerely Doubt That… I discuss the inflation-based price adjustments (IBPA) introduced by telecommunication companies with a special focus on Hungary. 

In my introductory blog I indicated that I would discuss and analyse topics that affect me, but which I have no power to bring about positive change. This is definitely one of these topics, because the telecommunication company does not even give me the right to terminate my current contract with them. Let’s explore what other service providers do in other countries, why this practice is so troubling in Hungary, and what we can do about it.  

My third week of January began with an email from my service provider Telecom letting me know that, from 1 April 2025 I will pay 3.7% more as part of their IBPA practices introduced back in 2022. In the last two consecutive years (2023 and 2024)  the imposed IBPA rate was 15% each year. 

In the UK, it has been common for telecom providers to implement mid-contract price increases linked to inflation. Companies such as BT, EE, and Vodafone have historically raised prices annually based on the Consumer Prices Index (CPI) plus an additional percentage, often around 3.9%. This practice has led to significant price hikes during periods of high inflation. Following a media campaign, including the Guardian’s investigation back in 2024 into how the UK’s largest mobile and broadband companies were pushing through the biggest round of price rises for more than 30 years, pressure has grown on the UK’s communications regulator, Ofcom to take action. The Guardian’s investigation found that six companies controlling most of the UK telecoms market had charged a 3.9% percentage point supplement on top of their annual inflation-linked increases. Ofcom also revealed that it had received more than 800 customer complaints related to price rises between January and October 2023.

As a result, Ofcom, has announced a ban on inflation-linked mid-contract price rises for phone, broadband, and pay-TV services starting January 2025. Providers will now be required to clearly inform customers about any potential price increases in monetary terms before contracts are signed.

In Hungary, there are three main mobile network operators that own and operate their own infrastructure, Vodafone, Yettel and Telecom. These companies dominate the market and unlike in other countries, there is little competition in the market. These networks ensure nearly full coverage across the country and they have complete, self-owned network coverage in Hungary. 

These companies have the right to change the General Terms and Conditions of our contracts without even giving us the right to terminate the contract due to the changes made to the General Terms and Conditions. And of course, all of this is lawful. But, it doesn't make it fair. Especially, in a country that in 2024, was ranked the poorest within the EU, with a 27% VAT, which is the highest within Europe. Due to significant increase in grocery prices, most families struggle to make ends meet. People cannot stand idly by as these companies make changes to the terms and conditions for their own benefits. From a consumer point of view, these changes only benefit the party who drafted the contract in the first place without thinking through the rights of consumers.

An important aspect of this story is that the Hungarian government introduced several so-called sectoral taxes over the years. In 2012 the so-called telecommunication tax was introduced and from 2013, the obligation to pay the public utility tax came into effect. Under this law, the tax subjects must pay HUF 125 (approximately GBP 0.28) per meter for the routes of pipelines that enable the provision of consumer services such as water supply, sewage disposal, natural gas, heat, electricity and telecommunications. Then in 2022, a government decree introduced additional telecommunications taxes, which reportedly meant that Telekom could face tax charges up to 25 billion forints ( approximately GBP 55,000,000.) The aim of these additional taxes was to generate extra revenue for the state from the telecommunications sector, especially from providers with with the highest profits.

And of course, the burden of the additional taxes will ultimately fall on consumers, as telecommunications providers respond to the extra costs with price increases or other fee hikes. This is exactly what happened in 2022, with the introduction of IBPA. In 2023, the government announced that it would eliminate the public utility tax burden on telecommunications companies effective from January 2024, and abolished the additional tax decree for telecommunication companies introduced in 2022 effective from January 2025. However, telecommunications companies have continued with their IBPA practises.

Customer service, of course, deny that the government-imposed additional taxes are linked to the IBPA. In fact, during a recent telephone conversation, one of the representatives assured me that the money is being used for developments...like he was reading from a script. Hungarian Telekom even stated that it wishes to invest 123 billion forints ( approximately GBP 270.6 million) into developing its landline and mobile networks between 2024 and 2027.

In some rural areas with limited network coverage, consumers are completely trapped in contracts with their respective service providers, unable to switch to another provider. Not that it would make a significant difference, as all three providers are doing basically the same. So for many of us, it really feels like there is no escape from these practices. For years we have been paying more and more for the same, unimproved services. From a consumer perspective, it can be argued that these companies do not serve our best interest by offering us the same services, but making it more and more expensive every year. I won't apologise for not caring for filling the packets of gazillion dollars worth of multinational companies across the globe. If this action is justified, does this mean that, in a signed contract with any service provider, I have little to no consumer rights if, and when, the provider decides to change its prices? Again, that does not sound fair and regulators should strictly regulate and closely monitor such practices. So what can we do? First of all, while acknowledging that Hungary is no way the UK, we need to draw inspiration from the Brits. Their investigative reporting, media campaign and numerous complaints worked. I called the Consumer Protection Advisory Network (a civil organisation) to inquire about the regulator and further steps. Now I know that we need to start by writing a letter of complaint to our respective service providers, then contact the regulators, the National Media and Infocommunications Authority. Perhaps if they receive a large number of complaints, they will be forced to regulate and closely monitor these companies.

I know it often feels like that we don't exactly live in a democratic state and therefore people often feel like doing anything is pointless, but together we have a standing chance to show these companies that their time is up and it's time to regulate thee IBPA-related additional charges.

See below contact information:

1. Yettel online form available https://www.yettel.hu/ugyfelszolgalat/meglevo-elofizetok

2. Telecom ugyfelszolgalat@telekom.hu 

3. Vodafone ugyfelszolgalat.hu@vodafone.com

4. National Media and Infocommununications Authority info@nmhh.hu 

Yours Sincerely, 

BB

Sources

HVG. (2025, January 16). A Magyar Telekom megint a sokat ostorozott visszatekintő áremelést alkalmazza. HVG. https://hvg.hu/kkv/20250116_A-Magyar-Telekom-megint-a-sokat-ostorozott-visszatekinto-aremelest-alkalmazza

Portfolio. (2025, January 16). Itt van, mennyivel emeli árait idén a Magyar Telekom. Portfolio. https://www.portfolio.hu/uzlet/20250116/itt-van-mennyivel-emeli-arait-iden-a-magyar-telekom-735011

The Guardian. (2024, July 19). Ofcom to ban inflation-linked mid-contract price rises on phones, pay TV, and broadband. The Guardian. https://www.theguardian.com/media/article/2024/jul/19/ofcom-to-ban-inflation-linked-mid-contract-price-rises-on-phones-pay-tv-and-broadband

Yettel. (n.d.). Díjváltozás. Yettel. https://www.yettel.hu/dijvaltozas

Telekom. (n.d.). Inflációkövető díjkorrekció. Telekom. https://www.telekom.hu/lakossagi/szolgaltatasok/inflaciokoveto-dijkorrekcio

Index. (2024, December 16). 4iG távközlés: díjemelés, infláció, Vodafone. Index. https://index.hu/gazdasag/2024/12/16/4ig-tavkozles-dijemeles-inflacio-vodafone/

Eurostat. "Household Material Welfare Varies Widely in the EU." Eurostat News, 17 Dec. 2024, https://ec.europa.eu/eurostat/web/products-eurostat-news/w/ddn-20241217-2.