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Ofcom proposes stiffer exit without penalty clause
Thursday 03 January 2013 10:51:35 by Andrew Ferguson

The fact the vast majority of homes in the UK have the option of hundreds of broadband retail providers means that competition is fierce to gain customers and results in a market with offers changing daily from half price introductory fees to free shopping vouchers.

In the midst of this writhing mass of competition Ofcom is attempting to make life easier for the consumer. A new consultation has launched that is asking for feedback on new proposals that will impose a much easier 'exit without penalty clause' so that consumers can leave a provider if the price goes up during the term of a fixed contract for telephone, mobile and broadband services. The current situation is that providers have to give one months notice of price changes, but people can only leave if the rise constitutes a 'material detriment' and with the Ofcom light touch approach to regulation this to date has meant no solid definition of what is material detriment. The end result that some providers allow people to leave if the price rises even by a penny, but others consider £1 per month to be insignificant.

Under current Ofcom rules (General Condition 9.6), communications providers are required to give customers a minimum of one month’s notice of any change to their contractual terms that is likely to be of ‘material detriment’ and customers must be able to withdraw from their contract without penalty following such notice.

To date, Ofcom has not issued any guidance on what is likely to constitute ‘material detriment’, leaving it for Communications Providers to consider the matter on a case by case basis. This has resulted in different interpretations of what constitutes ‘material detriment’ by providers and when the obligations under General Condition 9.6 are triggered.

Current rules on price changes

In the nine months to May 2012 Ofcom received 1,622 complaints related to changes in service terms and conditions, with many complaints relating to consumers not being aware that there may be price rises during the term of a contract. We believe that a good few of the complaints may have been due to people signing up to the big promotional figure of £3.25 for 9 months and not realising that half way through the 18 month contract the price would double to £6.50 per month.

One area that will greatly complicate the new rules is the Ofcom mandated retail price index based rises that Openreach and BT Wholesale is allowed each year for their wholesale products. The last round of changes actually saw the prices drop slightly, with Ofcom and lots of the press predicting retail price cuts, but due to other price pressures (e.g. cost of call bundles, subsidised hardware, cost of promotions) the retail pricing actually increased particularly for voice line rental.

Comments

Posted by tommy45 over 4 years ago
Well with execption of a few of the big players (mass market) Sp's & ISP's, that atr able to reduce prices,or give the impression that they are doing,
BT retail is increasing prices from this month, So not seeing any reduction here, sounds like more BT pulicity blurb to me

Posted by pcoventry76 over 4 years ago
Virgin are currently doing this. Which is a blessing for alot of the customers it seems!
Posted by Mince1978 over 4 years ago
Anyone who isnt happy with there service should be able to swap and change providers without any penalty at all...All isp's should provide 'uncapped' completely unlimited BB with fastest speed possible. They do have the capability to allow this..
Posted by Mince1978 over 4 years ago
Also...while im thinking about it...All the offers available to new customers should be available to existing customers too.. no excuses on that one.. OH and when you go over your usage limit...wether accidently or not.. If you get charged for going over then they shouldnt slow down your line as well.. double charge = very wrong...Rogue capitalism all the way! Very wrong..
Posted by andrew (Favicon staff member) over 4 years ago
@mince1978 while very admirable ideals, not sure most people want to the pay the £10 to £30 per month for each guaranteed Mbps.

Also too many rules might discourage competition and new entrants to the market.
Posted by Bob_s2 over 4 years ago
Why should people be able to chop and change without any penalty? There are costs involved

Why should all services be uncapped. Uncapped cost more you seem to want to be able to go for the very cheapest pacgage and then hammer it as much as you want
Posted by Bob_s2 over 4 years ago
THe example given seem to be poor. It states clearly it is an 18 month contract with a 9 month promotional price. What is not clear about that?
Posted by oddsandmods over 4 years ago
Yeah let companies like Virgin do 3 price rises in 1 Year and get away with it!!
Posted by 21again over 4 years ago
Contracts work two ways if a company wants me to sign up for their product by charging a price over say a 12 month contract then they should stick to it or allow the customer to move on, there is no mention of price increases being implemented during the course of a fixed contract in any of the T&C I've read.
Like many of the so called Regulators Ofcom struggle to be seen as fit for purpose, unless that purpose is to back industry and screw the public.
Posted by philce over 4 years ago
If I sign up with a provider for a minimum term then they should honour the price on the contract. Once the minimum term is over then price increases are fair game.

I agreed with Virgin retentions to stay for another 12 Months in July 2012, we agreed a price and I was happy. Increasing prices twice in the following 6 months is not on (line rental and then a general increase).

I have exercised my right to cancel early and without penalty, the conversation I had with them was painless and they accepted my request.

It seems I'm not the only one.
Posted by pcoventry76 over 4 years ago
@oddandmods they don't! each time they have allowed people to leave without penalty.
Posted by herdwick over 4 years ago
"there is no mention of price increases being implemented during the course of a fixed contract in any of the T&C I've read" - do any of them say there will be no price increase, that the price is fixed for the term, or indeed say what the price is ?
Posted by Bob_s2 over 4 years ago
I think people are confusing a fixed term contract & fixed price. Most contracts are for a fixed term. Inm the example five in it 18 monmths. It is not an 18 month fixed price contract. It clearly starts there is also a 9 month promotional price of £3.25 which at the current price would go to £6.50. Inles the contract says it is a fixed price deal it is not.
Posted by herdwick over 4 years ago
I've never seen a fixed term contract top be honest, only one with a minimum contract period.
Posted by mervl over 4 years ago
I despair of most people. They seem to think that money grows on trees or something. All income comes from consumers somewhere along the line, so when costs go up (as they always do, whilst people demand and consume more and more, just like all animals) you either pay through a subsequent price increase or you pay more to start with. You don't get "summat for nowt". Dream on, I suppose.
Posted by Bob_s2 over 4 years ago
As you say some people just want everytrhing. As long as the offer is clear I dont see a problem. In the example give it was clear.

I suspect that what some people think they should be able to do is sign up for an 18 month contract with an introductory offer and then leave without penalty at the end of that introductory price and move on to another one
Posted by chrysalis over 4 years ago
What I want to see is isp's been forced to offer short term contracts, I feel 18 months is excessive as a minimum. A quality product wont need a min term, dont give your customers a reason to move and they wont move. Customers that always chase the cheapest/retention deals probably arent worth keeping anyway.
Posted by professor973 over 4 years ago
Despite the offshore customer service, I feel that BT could tempt many back with shorter contracts. Infinity is proving that if you offer what consumers want, they will flock back. I would never return to BT while there is a 18 month tie-in. In fact I am now switching my line back to the Post Office, which now offers anytime calls to 01, 02, 0845, and 0870, along with free calls to mobiles at weekends. No tie-in and £17.75 a month, not much more than BT line rental. Three or six months over and above any free offer months should be the maximum.
Posted by willarch over 4 years ago
I agree with professor979.I switched from BT to Post office having used others before some who kept you waiting for 20 mins or more to answer a question.A very satisfied P.O. customer.I pay quarterly over the counter at my P.O.My choice no D.D.
Posted by dsf58 over 4 years ago
18 month contracts (with no "fixed price") plus demanding the right to stick their paws in your pocket and extract money by direct debit is typical of the big companies. Payment terms and contract lengths should feature higher in both comparison sites and adverts.

Personally I pay slightly more for a phone/broadband service with a one month contract length (they say it keeps them keen and honest) where they bill me and I choose how to pay. I also get a personal service with any queries (by phone or web) answered promptly by a human being with discretion to "do the sensible thing".
Posted by scootie over 4 years ago
@dsf68
sounds like my old life at PN. dont get me started on vm fprum 5 day wait for the lie or stall tacks wen moaning with clear evodence that the upstream freqiency in area are well overloaded for docsis thardware. gaming sucks unless you monitor hub up stats an force upstream chan change to get beter latency
Posted by anoldie over 4 years ago
Would be fairest if everyone was charged for use and all equipment billed separately.
For me, billing for use wouldn't make much difference, but why should heavy users be subsidised by low users?
Again if people had to pay seperately for routers and connections etc, there would be no excuse for ISPs to inflate charges and lock people into long contracts to get their money back.
Also it could be fairer for those who have bought decent kit with their own money. They should be able to use it freely without having to pay towards some of the rubbish being handed out by their ISPs.
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