Ofcom wants penalty-free exits if fixed contract prices go up

The communications regulator proposes a change in the rules so that you can leave your provider, without paying a penalty, if they increase prices during a fixed contract.

Ofcom has announced plans to allow customers to exit a contract, free of penalties, if their landline, broadband or mobile phone provider introduces any price rises during a fixed contract term.

2012 saw a number of firms take advantage of the existing rules, which allow them to raise prices by the rate of inflation, with O2 the latest, raising mobile costs by 3.2% in December. However, O2 customers could not use such a price rise as a reason to leave the contract without paying a penalty.

Ofcom now wants this to change.

Ofcom’s proposal

The communications regulator has launched a consultation on how to protect us from prise rises during fixed contracts, and this is its preferred option. It wouldn’t restrict providers from introducing price rises during fixed periods, instead focusing on the customer’s right to use such a rise as a reason to leave, penalty free.

Ofcom also said it expects providers to be more transparent about the potential for price rises, so that we are more informed before signing up to a contract with a mobile, landline or broadband provider.

The other options

The consultation includes a number of other possible approaches to the issue of price rises within fixed term contracts.

1) Simply improve the current lack of transparency around the potential for price increases.

2) Make customers have to actively ‘opt-in’ to any variable price contract.

3) Maintaining the status quo.

That last one isn’t exactly the most compelling. Indeed, I’m confident that of the options presented, Ofcom’s preferred revamp of the rules is the best one.

Ofcom admits it did consider installing a complete ban on price rises within fixed contracts, but is concerned that it would not “be consistent with the European legal framework”, hence why it has not been presented as a viable option.

Nothing will change for a while

Inevitably, this won’t be a quick fix. The consultation on the change will not close until 14th March, and all stakeholders are invited to share their views on the various options.

A final decision won’t be published until June, so I wouldn’t expect any changes to come into force until the autumn. Not much help to those people who have been hit by O2's price rises – of which I am one – but at least Ofcom has this important issue within its sights.

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