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Ofcom launches consultation on price rises during fixed contracts

Ofcom proposals win for Fixed Means Fixed campaign

Fixed means fixed

Ofcom has launched a consultation on how to protect consumers from unexpected price rises on fixed mobile, landline and broadband contracts.

In response to the 38,000 people who signed Which?’s Fixed Means Fixed campaign, Ofcom will now consult on price rises during fixed contracts.

All of the major mobile providers – O2, Vodafone, Orange, T-Mobile and Three Mobile – have increased prices for customers locked into fixed contracts. Collectively, customers will pay almost £150m extra per year on the back of these price hikes.

Most mobile providers’ terms and conditions allow price rises up to the RPI (Retail Prices Index) rate of inflation. This means customers must pay a hefty penalty to leave their contracts early – usually the remainder of their contract’s monthly payments. Ultimately, this means people have little choice but to accept mid-contract price rises, even though many were not aware that their providers were able to raise prices before signing their contract.

Ofcom’s consultation proposals

Ofcom has concluded that its current rules for communications providers are not operating effectively, as they do not meet consumers’ legitimate expectations that the price of a contract should be fixed. Instead, these rules leave consumers exposed to surprise price rises yet don’t offer the ability to avoid them.

Ofcom’s consultation proposes a number of options to protect consumers from unexpected price rises. At Which?, we welcome Ofcom’s recommended proposal to give consumers the option to exit without penalty if prices go up during a contract. Ofcom adds that it expects providers to be clear and upfront about the potential for price increases, and of the consumer’s right to cancel in the event of any price rise. 

The consultation also puts forwards other potential options including an ‘opt-in’ for variable price contracts and maintaining the status quo.

What Which? wants

In response to Ofcom’s consultation, Which? executive director Richard Lloyd said:

‘The day when fixed must mean fixed in mobile phone contracts is another step closer. That’s a good start to the New Year for the 38,000 people who supported our complaint to Ofcom about the giant phone companies hitting hard-pressed consumers with millions of pounds worth of unexpected price increases.

‘The mobile phone companies should see the writing on the wall, bring in these changes now and start playing fair with their customers without waiting for the regulator to rewrite the rules.’

We want the price of fixed contracts to be fixed. If prices change, consumers should be able to leave their contracts legally without paying a penalty. Consumers should also be made aware of their right to do this when they first sign up. We hope Ofcom will modify its rules so that consumers can switch their provider freely and take advantage of the best deals on the market.

If you agree with our Fixed Means Fixed campaign, you can help by responding to Ofcom’s consultation by either visiting Ofcom’s website or by commenting on Which? Conversation. The consultation closes at 5pm on 14 March 2013.

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