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UPDATE2 Ofcom Measures to Stop Mid-Contract Price Hikes Start Tomorrow

Wednesday, January 22nd, 2014 (1:55 pm) - Score 864
broadband-and-phone-prices-pound-sign

The communications regulator has confirmed that its new “guidance“, which aims to make it more difficult for broadband ISPs, mobile and phone providers to impose mid-contract price hikes, will finally be introduced tomorrow (23rd January 2013).

The measures essentially serve to clarify a rule that already exists, which means that customers should be given at least one month’s notice of any price increase and then be allowed to exit the contract without penalty (further details in last year’s announcement). Any change must also be communicated in a clearly marked and transparent way.

However, unlike before, providers will now find it harder to define certain price increases as a necessary part of the service (i.e. not subject to the rules) and thus practically any increase could give consumers an opportunity to leave and thus be deemed by Ofcom as “likely to cause material detriment” to the customer.

Similarly Ofcom has warned providers not to try and game the system by reducing their call, text and or data allowances, which might be included as part of your service.

Claudio Pollack, Ofcom’s Consumer Group Director, said:

We have reached an important milestone in our work to ensure consumers and small businesses have better protection against unexpected price increases. Additionally, our new guide highlights important factors customers might want to consider before entering into a new contract to help them understand exactly what they are signing up to.”

But it’s important to note that optional charges, such as those levied for exceeding a usage allowance or calls to premium rate services, would not be covered by the changes. Meanwhile some operators fear that the new rules might force them to increase their prices in order to account for rises that are not within their control, such as when BT hikes their costs to an ISP.

As usual Ofcom intends to monitor the implementation of its new rules and will also conduct a mystery shopping exercise to ensure that everybody is playing fair.

UPDATE 24th Jan 2014

A mention of O2 this morning for finding a crafty way around Ofcom’s new rules by putting their prices up just before the new measures were introduced.

Customers who signed up pre-23rd January 2014
Ofcom’s guidance only applies to contracts made from the 23rd January onwards. For customers who joined or upgraded before this date, our terms and conditions at the time you signed up stated that we are entitled to increase your monthly subscription charge by no more than RPI and no more often than every 12 months and are compliant with the body of general consumer protection law. Our advertising has also said ‘tariff prices may go up’ since January 2013.

Customers who joined or upgraded on or after 23 January 2014
Our current terms and conditions explicitly state that monthly subscription charges will increase (or decrease) every year in line with RPI. These are the prices customers are signing up to. Ofcom has confirmed that communications providers’ terms which explicitly provide for a customer’s monthly subscription to change each year in line with a specific percentage or index (like RPI) will not contravene its “fixed means fixed” guidance, provided such terms and prices are made clear to customers before they sign up.

For more information please see Ofcom’s updated guidance on material detriment in relation to price rises in fixed term contracts here: http://stakeholders.ofcom.org.uk/binaries/consultations/gc9/statement/guidance.pdf

UPDATE 26th Jan 2014

Take note that the new measures only apply to new contracts (i.e. those agreed after 23rd January 2014) and there’s also a caveat that allows for rises based on the natural annual increase in the Retail Price Index (RPI) / inflation.

Leave a Comment
1 Response
  1. Avatar DTMark says:

    “Similarly Ofcom has warned providers not to try and game the system by reducing their call, text and or data allowances, which might be included as part of your service.”

    and

    “optional charges, such as those levied for exceeding a usage allowance or calls to premium rate services, would not be covered by the changes.”

    But all of those examples would surely be covered by the legislation governing consumer law in these cases, which has nothing to do with what OFCOM is proposing.

    “Material detriment” does just mean “the headline price”.

    As one example, if you pay £30/mo for 500GB/mo and the ISP proposes to reduce that to 200GB/mo that’s a change to your “material detriment” with which you can disagree and it’s up to the ISP to back down if you state you do not accept this change, else you can leave without penalty anyway.

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