Clarification of Ofcom price rise guidance rules
We covered the recent news on the Ofcom price rise guidance (known as GC9.6) and it was extensively covered both online and on TV and radio, but it appears there are some caveats that we need to highlight to help avoid anger and confusion at a later date.
The guidance on price rises and their notification can be read in full on the Ofcom website. The key bits that were not clear from the original press release are as follows:
- The new rules only apply to new contracts, i.e. entered into on or after 23rd January 2014.
- A Retail Price Index (RPI) based rise if mentioned in the contract terms and conditions is allowed and does not constitute a material detriment. In other words the price is allowed to increase by the annual rate of inflation once a year.
So while the guidance is an improvement on the original wording, it does not go as far as many consumers expected. This has become a lot clearer due to a set of pricing changes at O2 that are in line with inflation as of January 2014 and are described as necessary to ensure network investment to ensure 2G/3G performance and many will also assume to help pay for upgrades needed to deliver 4G based services.
So while O2 is giving plenty of notice for the changes, they do not trigger the ability for people to exit their contract while still in the fixed term.
The moral is always make sure you read the contract and preferably print off a copy for your records, particularly for contracts that are 12 months long or longer.
No doubt there is going to be lots of shouting over this issue and calls from consumers for Ofcom to do what many thought they had done, but it is clear from the discussion documents once you wade through them that the commercial operators had all made their cases for the ability to be allowed to specify a RPI based price rise. While inflation has been low for some time now, it would be a lot more of an issue if inflation was to rise to higher levels. In the current situation where many still feel they have been stuck in a wage freeze for some years any increase in price of goods will cause lots of moaning and it will be a brave provider who increases prices unless all the others are likely to do the same.