Thursday 3 January 2013

OFCOM opens consultation over price rises during the life of your phone contract.

   During the last few months those of us who live in the UK will most likely have been subjected to price rises for our phone contracts. The reason for this is that in the small print of our terms and conditions, which no one ever reads, there is a sentence which allows the carrier to raise the cost of your contract by a small percentage of it's cost if the network deems it necessary, this would probably be enacted, as it has recently, to keep the cost of your contract in line with inflation.

   It seems OFCOM doesn't think this is entirely fair, after all you sign up for a contract at a certain price and you don't normally expect it to change during the life of the contract. That's why OFCOM has opened a consultation on how to manage changes to phone tariffs during the lifetime of the initial contract. Ofcom wants to implement an approach where you will be allowed to duck out of your contract without paying any penalties if your service provider introduces any price increase during the life of the contract.

   Carriers themselves would be obliged to be clear and upfront about any potential changes in the cost of contracts from the off and they would have to state your right to cancel the contract in the event of any price increase. The idea behind this is that it would remove the unfair price hikes which can ad have been used lately and it would remove the issues of people complaining to OFCOM because they had to pay the extra money without knowing it was in the contract. Indeed, Claudio Pollack, Ofcom’s Consumer Group Director, said: “Many consumers have complained to us that they are not made aware of the potential for price rises in what they believe to be fixed contracts."

   Other than this there are a few other options for OFCOM which include; tackling the current lack of transparency around the potential for price increases, cosidering whether consumers should have the choice to “opt-in” to contract with a variable price, which like credit cards offer. Or finally, OFCOM could issue a carpet ban on price rises contracts, which would seem to be the most logical step if they wish to avoid confusion and keep consumers happy and protected.

   We'll find the findings of OFCOM's consultation on March the 14th and OFCOM thinks they'll be ready to publish their findings some time in June.


Vodafone are the first company to comment on the OFCOM proposal and the main points of their statement are outlined below:

"We support Ofcom's desire to give consumers reassurance about the prices that they will pay during their contract, but the regulator's proposals risk generating significant confusion and potentially increasing the cost of getting a mobile phone contract for millions of people. As such they could damage what Ofcom's own research shows is the best value mobile phone market for consumers anywhere in Europe.
“We believe there is work to be done to ensure that customers understand the need for long-term contracts and to ensure they are protected during that time, but Ofcom first needs to understand the difference between the prices that are set by mobile phone companies and those which are not.... We simply do not control many of the charges faced by consumers. They are set by third parties and mobile phone companies have to pass those costs on or they will be subsidising other companies. Prices set by third parties such as BT, include those for directory enquiry services, premium rate and 08 numbers. Yet Ofcom appears resolved to introduce measures that would effectively prevent any rises in these prices being recouped while customers are still in contract." Statement via KYM.

   Vodafone argues this will mean carriers try to second guess what price increases third parties will attempt to introduce and as such the initial cost of contracts will increase and given their argument we can almost sympathise with them.

The full press release from OFCOM can be found here.


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