Ofcom threatens to act over telecoms contract price hikes

Regulator consulting on whether to allow customers to walk free after a mid-contract price hike

Stewart Mitchell
3 Jan 2013

Ofcom has finally proposed to take action over service providers increasing prices during fixed-term contracts, but won't ban the practice.

The telecoms regulator has instead announced a consultation on plans that would allow account holders of mobile and broadband services to switch providers if their ISP or mobile provider hiked prices mid-contract, a practice that has increasingly angered consumers.

Under the plans to change one of the General Conditions that service providers must adhere to, Ofcom has proposed that it must be made clearer that prices could go up despite customers having a contract, and that users should be able to quit the company without penalty if they are unhappy with the hike.

Ofcom is consulting on rules that we propose would give consumers a fair deal in relation to mid-contract price rises

"Of the options put forward, Ofcom's proposed approach is to intervene to allow consumers to exit their contract without penalty if their provider introduces any price increase during the term of the contract," the regulator said.

"Alongside this, Ofcom would expect providers to be clear and upfront about the potential for price increases and of the consumer’s right to cancel the contract in the event of any price increase."

The move comes after several high-profile cases last year, when companies including Sky, Orange and O2 increased prices for monthly services in the middle of contracts, citing rising costs.

The moves proved predictably unpopular with consumers, who believed they should pay what they signed up for at the start of their contracts.

"Many consumers have complained to us that they are not made aware of the potential for price rises in what they believe to be fixed contracts," Claudio Pollack, Ofcom’s consumer group director. "Ofcom is consulting on rules that we propose would give consumers a fair deal in relation to mid-contract price rises."

Watered-down alternatives

Service providers will have until 14 March to mount a defence of their practices, with Ofcom already listing several watered-down proposals – and the regulator has ruled out a blanket ban on mid-term hikes, claiming it could breach European legislation.

The weaker proposals include merely making it clearer that prices might go up, and another option that "considers whether consumers should have to actively 'opt-in' to any variable price contract".

Ofcom said it was also considering the implications of maintaining the status quo.

Read next month's PC Pro to find out why Barry Collins thinks it's time for Ofcom's dithering chief executive to go

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