Microsoft justifies 365 price increases after MP concerns

A UK government committee has raised concerns over Microsoft Copilot pricing and competitiveness and has called on the tech giant to justify recent increases.

Chi Onwurah, who is a member of the UK's Science, Innovation, and Technology Committee, said she was dismayed to see price increases for Microsoft 365 plans.

Onwurah said the respective 42% and 31% price increase for Microsoft 365 Personal and Family plans were in contrast with the 6% reduction that the government itself was able to acquire.

While customers are given the option to revert to a classic plan, this is on an ‘opt-out’ basis from the more expensive tier and this was not made clear in communications, Onwurah said. It is also not clear whether users can remain on this plan for more than a year.

The MP for Newcastle upon Tyne Central and West took aim at the impact on competition, saying that the bundling of Copilot with Microsoft 365 raises cross-subsidy and competition concerns.

Onwurah said Microsoft should address questions on the regulatory implications of bundling Copilot into 365.

Microsoft has run into competition trouble before with its 365 offering, with EU regulators accusing the firm of breaching antitrust rules by bundling Teams into the Microsoft 365 platform.

The EU claimed Microsoft restricted competition in the communication and collaboration product market with this move, an issue raised initially by rival, Salesforce-owned communication platform Slack.

Microsoft brushes off concerns

Microsoft responded to some of the concerns laid out by Onwurah in a letter penned by Microsoft UK’s VP of External Affairs, Hugh Milward.

Milward attributed the price increases to a series of issues, including the integration of “significant product enhancements, the rising costs of doing business, and inflation over the last 12 years”.

A key element of the product enhancements is the addition of Copilot features in Microsoft 365 applications such as Word and Excel, Milward said, which improve user experience in a way that consumers are coming to expect.

Regarding the price increase communications, Milward said the notices about price increases are centered around users’ current subscriptions and do not pertain to the other options that may be available.

Microsoft has also made ‘classic subscriptions’ available. These are cheaper plans that do not include generative AI capabilities, though the firm could not confirm how long these subscriptions would be available as a downgrade option.

The firm claims to offer a range of consumer choices in its productivity suites, with Milward noting that Microsoft offers a £1.99 a month Microsoft 365 Basic Plan and a one-time perpetual license purchase for Office Home 2024.

“We hope the above information reassures the Chair that Microsoft acted reasonably during the implementation of this price increase,” Milward said.

The price increase was carried out in a way that kept Microsoft’s commitment to always provide subscribers with the latest features, and with fair notice, choice, and control,” he added.

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