Should Subscribers be Able to Cancel their Contract Due to Price Rises?

Following a consultation on price rises for mobile contract customers, UK regulator Ofcom has proposed a modification to one of its rules, which affect all communications providers.

The amended rule would enable customers to freely leave their contract, without penalty, if their operator introduces any price increases. 

The rules as they stood technically required the price rise to be considered likely to cause ‘material detriment’ – something which the operator had to agree to – but with this change, customers would have the right to end their contract. Ofcom also says it would expect providers to be transparent about the consumer’s right to cancel the contract in the event of any price increase.

“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,” said Ofcom consumer group director Claudio Pollack. “Ofcom is consulting on rules that we propose would give consumers a fair deal in relation to mid-contract price rises.”

Back in December, O2 increased its contract prices by 3.2 per cent. At the time, Ofcom told us that this rise was acceptable, as long as customers were given fair warning and had the opportunity to withdraw if the rise would cause ‘material detriment’. The O2 spokesperson we talked to wasn’t willing to comment on the latter, but Ofcom clearly hopes to firm up this rule and close the loophole.

Ofcom is also considering three other possible solutions – improving transparency about the possibility of increasing prices; improving guidance for telcos on applying Ofcom rules; or giving users the decision of opting in to a variable price contract – but says in its release that is doesn’t consider any of these sufficient to address the issue of consumer harm. 

An outright ban on price rises has also been floated, but Ofcom thinks this wouldn’t be consistent with the European legal framework.

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