Ofcom wants penalty-free exits if fixed contract prices go up
The communications regulator proposes a change in the rules so that you can leave your provider, without paying a penalty, if they increase prices during a fixed contract.
Ofcom has announced plans to allow customers to exit a contract, free of penalties, if their landline, broadband or mobile phone provider introduces any price rises during a fixed contract term.
2012 saw a number of firms take advantage of the existing rules, which allow them to raise prices by the rate of inflation, with O2 the latest, raising mobile costs by 3.2% in December. However, O2 customers could not use such a price rise as a reason to leave the contract without paying a penalty.
Ofcom now wants this to change.
Ofcom’s proposal
The communications regulator has launched a consultation on how to protect us from prise rises during fixed contracts, and this is its preferred option. It wouldn’t restrict providers from introducing price rises during fixed periods, instead focusing on the customer’s right to use such a rise as a reason to leave, penalty free.
Ofcom also said it expects providers to be more transparent about the potential for price rises, so that we are more informed before signing up to a contract with a mobile, landline or broadband provider.
The other options
The consultation includes a number of other possible approaches to the issue of price rises within fixed term contracts.
1) Simply improve the current lack of transparency around the potential for price increases.
2) Make customers have to actively ‘opt-in’ to any variable price contract.
3) Maintaining the status quo.
That last one isn’t exactly the most compelling. Indeed, I’m confident that of the options presented, Ofcom’s preferred revamp of the rules is the best one.
Ofcom admits it did consider installing a complete ban on price rises within fixed contracts, but is concerned that it would not “be consistent with the European legal framework”, hence why it has not been presented as a viable option.
Nothing will change for a while
Inevitably, this won’t be a quick fix. The consultation on the change will not close until 14th March, and all stakeholders are invited to share their views on the various options.
A final decision won’t be published until June, so I wouldn’t expect any changes to come into force until the autumn. Not much help to those people who have been hit by O2's price rises – of which I am one – but at least Ofcom has this important issue within its sights.
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Just remember that the Regulator is there to protect the interests of the industry, while making us think that they are protecting the interests of the consumer. If they were really protecting our interests, they would have forced providers to stick to the prices offered at the time the contract was agreed, not allow one side to change the terms as they saw fit. They want OUR money on THEIR terms.
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Surely the whole point is, what is fixed? If the contract is fixed PRICE then any provider of anything under such a contract would have broken the contract if they increased the price. As far as I can see these mobile 'phone contracts are fixed TERM, in which case, please read the contract before singing it. 'Course if one of the incentives was a guarantee of no price increases over the length of the contract then the contract is again fixed price.
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I have a pay as you go mobile so I am not in this market BUT when I take out a contract price is always a central Term. Are we saying that these fixed term contracts allow the company to raise prices at any time? If the terms are fixed only for one side where is the advantage for the user? The whole of the contract is that the company contracts to deliver services and the user contracts to deliver money and with a fixed term contract the terms are fixed for the period of the contract. While there is no legal requirement for this to be the case, price is a normal and important term of a contract so the price should also be fixed. A legal consultation would be needed to verify this and I am not a lawyer, however, it would seem to me that it meets the description of an unfair contract and as such, under existing fair trading regulations, it is unenforceable. If all suppliers have the same terms perhaps we should shout "CARTEL". If you want to act, certainly don't wait for the regulator. Despite their weasel words, in reality they protect the industry not the consumer.
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04 January 2013