Mid-contract phone and broadband price hikes inspected
Thursday 18 October 2012
Customer concerns over mid-contract price hikes imposed by phone and broadband companies are to be investigated by the telecoms watchdog.
Ofcom is to consult on how to protect consumers after a review conducted earlier this year raised the alarm over the practice, which according to consumer group Which? has hit 10 million customers.
Several companies have increased prices for contract customers this year, including Vodafone, which revealed line rental on fixed contracts would increase £1.55 a month from November. Three, T-Mobile and Orange have already done so, Which? said.
Meanwhile, the full rollout of 4G moved a step closer after it emerged Vodafone, Three, O2 owner Telefonica and Orange and T-Mobile parent EE do not intend to bring a legal challenge against Ofcom over its 4G auction process.
In response to Ofcom's plans to consult on how to protect consumers from unexpected price increases within 'fixed' phone contracts, Which? executive director Richard Lloyd said: "We hope that Ofcom will now act swiftly to ensure that the mobile phone companies are made to drop hidden clauses in their contracts that allow them to hit consumers with millions of pounds' worth of unexpected price increases."
The consultation, which Ofcom aims to publish by the end of the year, will consider whether price variation terms in fixed-term contracts are appropriate and will look at related issues including information provided to consumers at the point of sale.
During the course of its review earlier this year, Ofcom examined 1,644 consumer complaints made to the regulator about changes to terms and conditions during the period September 2011 to May 2012, alongside further evidence provided by Which?.
Many consumers complained they were not made aware of the potential for price rises in what they believed to be fixed contracts, Ofcom said.
Consumers felt that communications providers should not be able to impose price increases during the life of a contract, Ofcom added, and the consumer should be able to exit the contract without penalty if they do.
Claudio Pollack, Ofcom consumer group director, said: "Ofcom understands the frustration that consumers feel when faced with price rises in what they assume to be a fixed contract with a fixed price.
"Having considered the large number of consumer complaints, we will soon consult on ways to address consumer concerns and ensure they are being treated fairly in this area."
The announcement came as EE, Telefonica O2, Three and Vodafone announced they have made further progress in speeding up the rollout of superfast 4G services.
O2, Three and Vodafone threatened legal action when Ofcom gave the go-ahead for EE to launch its 4G services later this month.
Following discussions with Ofcom and ministers, the four mobile phone companies have confirmed they will not take any legal action.
The companies also formally created a jointly controlled company required to ensure the rollout of the services next year.
The four operators formed Digital Mobile Spectrum, originally called MitCo, which will be responsible for ensuring that consumers continue to receive clear Freeview TV signals following the rollout of 4G services using the same spectrum.
Culture, Media and Sport Secretary Maria Miller said: "The rollout of 4G is a huge step forward for mobile broadband services in the UK, and will be incredibly important in driving economic growth."
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