The government has asked the media regulator to review its rules on phone companies raising prices mid-contract, after O2 unexpectedly announced it was raising prices by £2.50 a month.
Technology Minister Liz Kendall said the higher-than-expected O2 price rise was “disappointing given the current pressures on consumers”.
“I think we need to go further and faster. I really want us to look again at contract price increases,” she wrote in a letter to the media regulator.
Ofcom said it shared the government's concerns that “mobile phone providers must treat customers facing price increases fairly.”
O2 said in a statement: “We understand that price changes are never welcome, but we have been completely transparent with our customers regarding this change, writing to them directly and giving them the right to withdraw without penalty if they wish.”
Ofcom was given until November 7 to respond to Ms Kendall's letter and the company said it would respond to her specific questions shortly.
In January there are new rules which has targeted phone and broadband providers raising prices mid-contract without warning.
However, last week O2 announced that it would increasing monthly prices more than originally promised.
This was possible because the increase was not linked to inflation and customers were given 30 days to walk away without penalty – as long as they continued to pay off the cost of their device.
The company said it had not gone against regulation and Ofcom rules did not prevent suppliers from raising prices.
“The price rise, equivalent to 8p a day, is significantly outweighed by the £700 million we invest annually in our mobile network, with UK consumers benefiting from an extremely competitive market and some of the lowest prices compared to international peers,” it said.
Ms Kendall, in her letter to Ofcom chief executive Dame Melanie Dawes, said O2 had gone “against the spirit” of the rules.
She asked Ofcom to investigate whether the 30-day switching period allows consumers to switch providers fairly easily.
“I would love it if you would do a quick survey of how easy it is for customers to switch service providers,” she said.
“If companies are determined to raise prices, we have a responsibility to make it as easy as possible for customers to move elsewhere.”
She also asked for an assessment of whether the January rules give consumers sufficient transparency about price increases during their contracts.
Ofcom rules require companies to tell customers how much their bills will rise in pounds and pence before the contract begins.
O2 initially said its monthly prices would rise by £1.80 per month in April 2026 for existing customers.
But now the firm says they will rise by £2.50 instead.
Ms Kendall said she wanted phone service providers to tell all their customers, including those whose contracts started before the new rules, how much their monthly prices would rise.
“We've always said fixed should mean fixed,” said Tom McInnes, policy director at charity Citizens Advice, adding that the current rule “doesn't go far enough to protect customers”.
“If one company gets away with it, other suppliers may follow suit,” he said.
“It’s time for the regulator to permanently abandon mid-contract price increases.”
Meanwhile, telecoms analyst Paolo Pescatore of PP Foresight said UK network operators are “cash-strapped as profits decline.”
He added: “Finding the right balance between raising much-needed funds and investing in next-generation networks is never easy.”
But he said that while other suppliers would normally follow the announcement of similar price increases, “it seems extremely unlikely that competitors will follow suit given the negative consumer reaction and awareness generated so far.”
