BT, TalkTalk and Virgin Media home phone customers will have to pay much lower early termination fees if they want to switch providers before their contracts end, according to an announcement today by phone watchdog Ofcom.
The three home phone market leaders have agreed to slash their early termination charges for their home phone, and some home phone and broadband, contracts – by up to 85% in some cases. The agreement is the result of ongoing work by Ofcom to bring down the cost of leaving a phone contract early to fair levels.
TalkTalk has already introduced its new early termination fees; BT and Virgin Media will introduce them in October 2010.
The announcement follows a recent Which? investigation into phone contract cancellation terms which revealed that it could cost hundreds of pounds to leave a home phone contract early. Which? also found that many people had no idea how much it would cost them to end their phone contract early.
Find out more about home phone early termination fees in the free Which? guide to home phone contracts
The high cost of switching home phone service
When you first sign up to a home phone or bundled home phone and broadband service you must usually commit to a lengthy 12 or 18-month contract. If you want to end the contract early, most providers require you to pay an ‘early termination fee’.
But Ofcom guidance says that early termination fees should never exceed the cost of remaining contractual payments less any savings the provider makes from no longer providing the service.
BT, TalkTalk and Virgin Media’s previous charges ranged between £7.50 and £29.99 for each outstanding month, depending on the company and package.
BT, TalkTalk and Virgin’s new charges
The phone giants say they do not believe their former fees were unfair. However Ofcom wants to be sure that the providers’ early termination fees reflect the costs they save by no longer providing the service.
Under the new agreement BT, TalkTalk and Virgin Media phone-only customers must pay early termination fees of between £2 and £5 per outstanding month, depending on the package. Customers of TalkTalk and Virgin Media’s phone and broadband bundles must pay no more than £8 or £9 per outstanding month.
Charges differ slightly between providers as the costs to the companies may vary. Full details of both former and new early termination fees are available on Ofcom’s website.
High termination fees prevent switching
Ofcom says that it is pleased that BT, TalkTalk and Virgin Media have taken these positive steps in the interests of consumers.
It adds that it expects other landline providers to apply similar principles and to reduce their early termination charges to similar levels. Ofcom warns that if rival home phone providers such as AOL and Orange don’t follow suit they could face formal enforcement action.
Which? phone expert Ceri Stanaway says: ‘Which?’s constant advice to people who are unhappy with their phone or broadband service is to vote with their feet and switch. High early termination charges are a real barrier to people’s ability to leave the provider they’re unhappy with.’
Cancellation fees should be fair and transparent
‘Phone and broadband customers accept that long contracts with early termination fees are the price they must pay for a good deal – but cancellation fees should be fair and transparent’, Ceri continues.
‘We commend BT, TalkTalk and Virgin Media for considering the best interests of consumers and cutting their early termination fees for home phone services and home phone and broadband bundles. We hope they are planning to apply the same reasonable principles to other services they offer, such as broadband-only contracts.
‘We’d also encourage rival phone and broadband providers to cut their early termination charges as soon as possible, and expect Ofcom to act swiftly if they don’t.’
Ofcom has not yet made any announcements regarding early termination fees for standalone broadband, pay-TV or mobile phone contracts, but it says it is continuing its work to ensure consumers pay fairer early termination charges across all communications services.
Find out which broadband providers offer the best service and how much they charge to end their contracts early in the Which? broadband review.
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