Ofcom put an end to rolling contracts for broadband and landline customers
Ofcom today published a statement confirming that they are amending their General Conditions to prohibit Automatically Renewable Contracts. The General Conditions are set by Ofcom (as regulator of the communication industry) and apply to all "providers of communication" that are defined in these conditions.
To be clear, an Automatically Renewable Contract is one that "self renews" at the end of fixed term and takes you in to a new minimum contract period if you do not make your current provider aware that you wish to opt out. It is the opting out that Ofcom seem to think is not fair on consumers. They also believe that it is not good for competition in the industry in that if someone rolls over to a new contract they are then tied in for a fixed period and therefore possibly unable to benefit from a better value product or a better service elsewhere.
Ofcom's Chief Executive, Ed Richards, said "Ofcom's evidence shows that ARCs raise barriers to effective competition by locking customers into long term deals with little additional benefit. Our concern about the effect of ARCs and other 'lock in' mechanisms led to our decision to ban them in the communications sector."
Ofcom are well aware that the implementation of this change cannot happen overnight. Therefore they are saying that Automatically Renewable Contracts are to be completely removed from the market by 31st December 2012. The sale of new automatically renewable contracts to residential and small business customers will be prohibited from 31 December 2011. Not only will this affect individuals as consumers, it will also reach out to "small businesses" who have 10 or less employees.
So, great news for consumers and small businesses. However, bad news for many communication providers. It will be interesting to see what incentives (if any) will be offered to customers to stay after their minimum period and what deals can be offered for those looking to switch away.
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