Ofcom launches consultation on price rises during fixed contracts
- Published on Thursday, 03 January 2013 16:11
- Posted by Scott Buckler
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.