Which? warns on mobile phone contract price rises
Monday 16 July 2012
Mobile phone companies could be making up to £90 million a year by legally using “hidden” contract clauses to raise the cost of what should be fixed-rate tariffs, the consumer group Which? warns today.
The organisation has filed an official complaint to regulator Ofcom after an investigation found that 70% of people on fixed contracts did not know that network providers could increase prices during the lifetime of their contract.
It has launched a campaign, Fixed Means Fixed, calling for an end to price increases on mobile phone contracts, arguing they should stay the same price from start to finish of the contract.
Richard Lloyd, the executive director of Which?, said: "These hidden price rises mean millions of people are forced to pay more than they expected at a time when household budgets are already squeezed.
"They are then trapped in a contract, unable to switch to a cheaper provider without paying a hefty penalty.
"Ofcom must intervene now and stamp this out. Consumers must be confident that fixed really does mean fixed."
Which? said companies including Three, Vodafone, T Mobile and Orange were all raising prices, saying Three was today increasing its fixed-tariff prices by 3.6%, a move Which? said would affect more than one million customers.
It said it had been contacted by more than 1,700 people regarding price rises and called for price and all other aspects of fixed deals to remain the same for the contract period when consumers are also tied-in.
If there is a chance that prices may rise, operators must be more upfront about this in their advertising and allow people to switch providers without penalty, it said.
On its website, Three said it was increasing the cost of phone and mobile broadband contracts set up before March 8 2012 by 3.6%, in line with the Retail Price Index (RPI) measure of inflation.
"Our terms and conditions allow us to raise prices in line with inflation so that we can cover our business costs," it said.
"This means that you won't be able to leave your contract early as a result of this change.
"While we know a price increase is never welcome, this is the first time that we've ever raised the price of our pay monthly phone contracts and we're confident that your plan still represents excellent value for money."
Ofcom said it had been investigating the practice across all networks since January after receiving complains and said it would look at information submitted by Which?
A spokesman said: "We understand why consumers in fixed term contracts are sometimes disappointed to find that the particular contract they have signed up to allows price rises.
"While current rules allow for contracts to include price increases in certain circumstances, after receiving consumer complaints on this issue, Ofcom launched a review in January 2012.
"The review is examining requirements on communications providers relating to consumer contracts, including provisions covering changes to contracts.
"This exercise has identified a number of potential issues with the current regime and the adequacy of the current level of customer protection.
"We will consider the material provided by Which? alongside this evidence. We will also be meeting Which? to discuss their concerns in more detail before we make any decisions regarding our work under our current review."
A Three spokesman added: "No one likes price increases and this is our first for contract handsets in our eight years of operation.
"It's in line with inflation and lower than price increases from other mobile networks.
"On a £15 a month contract it is a rise of just 54 pence.
"We believe our offers remain great value."
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