Consumers should be allowed to switch their landline, broadband or mobile contract without penalty if their provider increases the cost of their monthly deal, the telecommunications regulator has said.
New Ofcom guidance said that any increase in a bill would be considered as “detrimental” to the contract – and ruled that companies should give consumers at least 30 days’ notice of any such price rise.
Consumer groups welcomed the news and said it was likely to deter providers from hiking bills in fear of losing customers a few months into a new contract, but warned that the move could also mean that firms could increase their overall prices in a bid to avoid the problem.
“Considering that most mobile contracts are two years long, two annual increases could tip bill-payers over the edge and, until now, there’s been no way out,” said Ernest Doku, telecoms expert at uSwitch.com. “Consumers have just had to suck it up and pay more. To make matters worse, many are often unaware that bills could go up – a fixed-term contract doesn’t mean fixed prices.
“However, while this is undoubtedly a major win for telecoms customers, the big worry is that networks and providers will start raising prices to compensate. There could also be repercussions for mobile customers who got a handset with their deal: will they have to return it or buy it outright, or will we see the end of free devices?”
He added: “Ultimately, though, this is good news for consumers who are tired of having to put up with higher bills without a way out.”
The new guidance comes into effect in three months and will apply to any new landline, broadband or mobile contract entered into after this date. There have been no specific changes to the rules, but the way they were interpreted has differed among providers.
Claudio Pollack, Ofcom’s consumer group director, said: “Ofcom is today making clear that consumers entering into fixed-term telecoms contracts must get a fairer deal. We think the sector rules were operating unfairly in the provider’s favour, with consumers having little choice but to accept price increases or pay to exit their contract.”
Which? executive director Richard Lloyd said: “Today’s announcement from Ofcom is an overwhelming victory for the 59,000 people who joined our campaign calling for fixed to mean fixed on mobile phone contracts.
“Consumers told us price hikes on fixed contracts were unfair, and now people will be able to leave these contracts and switch to a cheaper provider without being hit by extortionate exit fees.”
Ofcom added that the guidance would also apply to reductions in the call, text or data allowance included in a customer’s monthly subscription price, which would be regarded as a price increase.
The guidance will also apply to small business customers –companies which have fewer than ten employees.