"Consumers and small businesses should be allowed to exit their landline, broadband or mobile contract without penalty if their provider increases the cost of their monthly deal, Ofcom announced today "

Source  :http://consumers.ofcom.org.uk/2013/10/protection-for-consumers-against-mid-contract-price-rises/

BBC Coverage Here: http://www.bbc.co.uk/news/business-24636682

Note the new guidance comes into effect three months from today on 23 January 2014. It'll apply to any new landline, broadband, and mobile contract, including bundled contracts in some cases, which begins after that date.

From today  these new rules come into force and your free to switch if your prices are increased.

All parties involved have agreed to do this.

The new rules mean that providers are still free to raise prices, but they have to give a month's notice if they do so.

Customers who decide to switch provider as a result will not have to pay an exit fee.

The same applies if the provider reduces the number of minutes, or the amount of data provided, rather than actually increasing the charges.

Important Note. Customers only have 30 days to switch, after they receive notice of the increase.


See: http://www.bbc.co.uk/news/business-25847014

Ofcom, I believe, have watered this down as these providers can still increase prices mid contract so long as it was in their t&c that they (the providers)  may change prices.

I haven't read the full thing but it seems they can only do this once but not certain yet whether it's once per year or life contract.

IMHO, I think this was done to stop these providers from challenging ofcom.

If I get time over weekend I will try again to read it better as I only very quickly scanned it.

bbb_uk wrote on Jan 25^th, 2014 at 1:26pm:

Ofcom, I believe, have watered this down as these providers can still increase prices mid contract so long as it was in their t&c that they (the providers)  may change prices.

It always was in the t&c, the problem is that it was not drawn to the attention of customers and that often, when they asked, customers were told the price was fixed, despite what it said in the t&c. I suspect the difference now is that suppliers will state that the price will increase with inflation, not that it might, and ensure that customers explicitly agree to this (which is fair enough, IMO).

Ofcom have used the headline:-


Quote:

Consumers and small businesses1 should be allowed to exit their landline, broadband or mobile contract without penalty if their provider increases the cost of their monthly deal, Ofcom announced today.

Well that to me implies that if price does rise you can escape contract.

I believe Ofcom have mislead consumers based on lines like that.

Basically nothing has changed really except that they have given the all clear for these companies to increase prices with Ofcoms blessing.  Yes companies are obligated to inform consumers but really they were obligated anyhow to point out any significant t&c like that but never did as it wasn't good for sales staff on commission.

What's to say these companies will pretend they have told  consumers or what's to say us consumers pretend they haven't told us as anything said verbally wont mean much without proof.

There are two significant points here.

Firstly, there is the issue of transparency and clear pricing. That appears to have been addressed, although there may be a question of the prominence with which the O2 price increases are declared.

The second point relates to the effective and lively competitive marketplace, which Ofcom has a duty to maintain. All consumers should benefit from a marketplace, not just those who make it work by continually switching providers, or being new entrants. Whilst it is reasonable for providers to reward long term commitment by discounts, it is absurd to demand a commitment so long that the effect of general inflation on provider costs has to be considered in setting prices. Each period of commitment must surely be at a fixed price, with options to exit from the arrangement being equal for both sides.


I see the problem with the contract mobile market arising from the fact that two quite different items are bundled together - the lease of a handset and the provision of network service.

It is the necessary duration of the former which creates the problem with the pricing of the latter. I believe that some work needs to be done on the possibility of splitting the two, and furthermore on setting a fixed charge for network connection for voice calls and texts, separated from call charges.


May one assume that O2 staff and suppliers have contracts which allow them to increase their remuneration and prices in line with the RPI? In economic terms this is disaster, as it denies any check on the spiral of inflation.

SilentCallsVictim wrote on Jan 26^th, 2014 at 3:13am:

Firstly, there is the issue of transparency and clear pricing. That appears to have been addressed, although there may be a question of the prominence with which the O2 price increases are declared.

I just think that if its left companies to be expected to say to a new customer getting a contract something along lines of "oh by the way the £40 per month you're paying isn't fixed and we will increase it by an unknown amount sometime in future when we want to and there isn't anything you can do" is less likely to happen.  For several reasons including it's not going to bring in more sales and more important is a sales person on commission is less likely to be honest and upfront as this person is expecting a sale to increase their pay.


Quote:

The second point relates to the effective and lively competitive marketplace, which Ofcom has a duty to maintain. All consumers should benefit from a marketplace, not just those who make it work by continually switching providers, or being new entrants. Whilst it is reasonable for providers to reward long term commitment by discounts, it is absurd to demand a commitment so long that the effect of general inflation on provider costs has to be considered in setting prices. Each period of commitment must surely be at a fixed price, with options to exit from the arrangement being equal for both sides.

They could take into account price rise when setting contracts and then could say no price rise for life of contract* like tescomobile do.

* except for things outside networks control like VAT increases.

Basically I just don't see any major difference than what was previously already allowed except to clarify that a price increase is allowed and nothing can be done.  Yes in a perfect world with honest people and honest companies then being more upfront that a price rise will happen is better than misleading consumers into thinking prices are fixed but I just don't think we live in this perfect world  :)

"Three and Vodafone will not be following O2’s move to add mid-term price rises to new and upgrading customers’ contracts."
- See more at: http://www.mobiletoday.co.uk/News/28003/three_and_vodafone_back_ofcom_ruling_on_mid-term_price_rises.aspx#sthash.t2TDwv2j.dpuf

There are now two types of contract:

1. One where a telco does not include anything about price rises in contracts which means that should it subsequently put prices up, customers will have the right to exit without penalty, and;

2. One where a telco includes notification of future price rises within contracts. In this case customers have no right to exit without penalty, unless any price rise is greater than advised in the contract.


Contrast this with the situation before the Ofcom Guidance. Telcos were free to increase prices without any requirement for customers to exit without penalty which in-turn meant that they never had to write any increases into contracts. Thus, as SilentCallsVictim says, the Guidance has introduced clarity.

For type 1 contracts, prices will be higher than for equivalent service offerings with type 2 contracts. This is because providers have to take account of future inflation, which is somewhat of a guessing game.

In a utopian world consumers would be able to have their cake and eat it. There would be a price fixed over the term of contract and the price wouldn't be inflated due to the uncertainty of inflation.

In other markets, such as financial services, and gas and electricity, there are different types of contracts. For example, fixed and variable savings interest rates. Why should telecommunications be any different?

Plus, echoing another point made by SilentCallsVictim, by only allowing only contract type 1 consumers who don't continually switch providers will not benefit from the market. They would generally be better suited to type 2.

Dave wrote on Jan 30^th, 2014 at 12:38am:

Contrast this with the situation before the Ofcom Guidance. Telcos were free to increase prices without any requirement for customers to exit without penalty which in-turn meant that they never had to write any increases into contracts.

If someone challenged it enough I believe they could still exit a contract because it wasn't wrote into the contract that a price rise would happen thereby implying the contract is fixed.


Quote:

Thus, as SilentCallsVictim says, the Guidance has introduced clarity.

That's all they have done but that still doesn't explain Ofcom's first paragraph (as I quoted) which implies no price rises now.


Quote:

In other markets, such as financial services, and gas and electricity, there are different types of contracts. For example, fixed and variable savings interest rates. Why should telecommunications be any different?

I thought likes of fixed rate saving and fixed gas/electricity is actually fixed as I've never known them to then change rates mid way through a contract, unless it's variable rate which then isn't generally a contract so can switch anytime and they have names like "variable rate" to make it clearer.

Now compare this to teleco's that never openly admitted contracts would rise mid way (with some not evening mentioning they would rise in t&c) but yet they still wanted to raise it anyhow.

It's unfair to omit something (like prices will increase) when selling a mobile contract for example but still increase it anyhow.

I personally don't think sales persons are going to draw attention to the fact that prices will rise mid contract before the contract is signed by us customers.

There is also the issue that customers that are aware prices will rise still wont know by how much by so that creates uncertainty which Ofcom claimed they were trying to avoid!!

Yes, I agree inflation has to be taken into account but be upfront and honest and not just increase it without warning  consumers in advance of them signing a contract.

Gas and electricity fixed prices are generally higher the longer the contract so they take into account inflation, etc.

Basically what would be fair is that sales persons inform potential customers that prices aren't fixed and may rise by an unknown amount (which it technically is) BEFORE a contract is signed thereby stopping the misleading practice of consumers thinking the price quoted is for the life of the contract.

Vodafone have said that they will actually freeze pay monthly tariffs rather than increase it mid-way.

I think now then that means Three, Tescomobile and Vodafone will now honour the 'idea' of fixed contract.  Just leaving O2 and EE (out of the main networks anyhow) to continue to increase prices mid-contract.