Bad deals abound in world of the mobile

Portable phone charges: Many users may be trapped in unfair contracts with penalty termination clauses
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Technology Correspondent

One in four mobile phone users may be trapped in unfair contracts, and face hidden charges if they try to escape them, the Consumers' Association says in a report published today.

It criticises a number of practices commonly used by service providers, such as contracts in which customers must pay for at least 15 months' use and then have to pay an extra fee for disconnection from the phone network - or face legal action for non-payment of bills.

"All too often people make a big mistake when buying a mobile phone," said Charlotte Gann, senior editor of Which? magazine, published by the association. "Millions sign up, but our information suggests that at least a quarter of those regret their choice."

There are presently more than 4 million mobile phones in use in the United Kingdom.

But mobile phone companies, stung by the criticism, reply that consumers too often expect to get something for nothing by signing contracts which offer phones worth up to pounds 300 for as little as pounds 10. In those cases, the seller of the mobile phone has effectively subsidised the customer's purchase.

"The contract should be looked at in its entirety because the reseller of the airtime on the phone networks has to have a chance to recoup that subsidy," a spokeswoman for Vodafone, which operates one of the four networks in Britain, said.

One service provider said: "It's obvious to anyone that these phones are worth much more than pounds 10."

However, Which? says that too often the charges associated with the contracts are hidden away in the small print.

Ian Campbell, managing editor of What Cellphone? magazine, said: "There are some outrageous practices out there. It has been known for companies to set up their off-peak charge time so that rather than running from 6pm to 9am, it runs from 2am until 6am. You have to look at every asterisk and sub-clause. I think the Which? report was rather mild, actually."

Mobile phone contracts in Britain are complicated by the system originally set up when the first two networks - Vodafone (then a division of Racal) and Cellnet (part-owned by British Telecom) - were licensed by the Government in the 1980s.

To introduce an extra tier of market forces, the Government banned the networks from selling phones directly. Instead "service providers" had to buy airtime on the network and sell that, and phones, to customers. The idea was to provide an incentive to drive prices down. But in most cases it had the opposite effect.

Many dealers found the best way to bring customers in was to offer the phones at below cost price and make profits on the airtime by tying them into long-term contracts.

So contracts which oblige the customer to a minimum period of 15 months are common. These last for an initial period of one year and then require three months' notice for termination. To end the contract before then, the customer must pay for the full period.

"The whole set-up was, and is incredible," Mr Campbell said. "There are people out there selling phones who are making a shitload of money off it, at the expense of the consumer."

But he added that the recent arrival of networks such as Mercury One- to-One and Orange, which can sell both phones and airtime, has helped to drive down costs.

The Consumers' Association wants to challenge the terms of some contracts in the High Court, but presently only the Office of Fair Trading is allowed to do so. The association has begun legal action under European law to extend that right, In the meantime, it urges customers trapped by an unfair contract to contact the OFT.