Feeds

Ofcom says no to automatically renewed contract badness

Telcos banned from rollover contracts with leaving penalties

Top three mobile application threats

Telecoms firms will be banned from automatically signing customers up to renewed contracts with minimum contract periods, telecoms regulator has said. It said that 15 per cent of home phone users are tied into such contracts.

BT and a number of smaller providers operate such contracts but this must stop, Ofcom has said in a consultation proposing a change to its rules on contract terms.

Automatically renewable contracts (ARCs), or rollover contracts, sign users up to subsequent contract periods once a first contract period ends unless the telecoms operator is asked by the users not to.

These subsequent contracts have fixed terms and penalties for leaving early, according to Ofcom. It said that they should be banned because they are unfair to customers and damage competition in the home telecoms business.

"We are concerned that ARCs are damaging to consumers and competition in communications markets," said the Ofcom consultation (71-page/443KB PDF).

"We have identified two types of harm to consumers: a direct effect coming from the potential for ARCs to increase individual consumers’ exposure to switching costs (in the form of an [early termination charge]) and an indirect effect coming from the potential for ARCs to lessen competition in the market, thereby reducing the pressure on firms to lower prices, and improve quality for all consumers," it said.

Ofcom said that it had conducted research linking ARCs with a reduction in levels of customers changing providers.

"Our research, in particular the expert econometric analysis that we have commissioned, indicates a clear causal link between ARCs and reduced levels of consumer switching," said the paper. "Furthermore, it shows that the effect is separate from the impact on switching levels of other factors such as price discounts. We believe this effect stems from the opt-out nature of the process for contract renewal, rather than a lack of transparency surrounding ARC terms or the complexity of the process for opting out."

"Because it stems from such a core aspect of ARCs this indicates that any example of such a contract is likely to be harmful to consumers and to effective competition," it said.

It said that it proposed to make a change to General Condition 9 to ban minimum contract periods that are automatically entered into unless a customer opts out of them.

Copyright © 2011, OUT-LAW.com

OUT-LAW.COM is part of international law firm Pinsent Masons.

Top three mobile application threats

More from The Register

next story
A black box for your SUITCASE: Now your lost luggage can phone home – quite literally
Breakfast in London, lunch in NYC, and your clothes in Peru
Broadband Secretary of SHEEP sensationally quits Cabinet
Maria Miller finally resigns over expenses row
AT&T threatens to pull out of FCC wireless auctions over purchase limits
Company wants ability to buy more spectrum space in auction
EE dismisses DATA-BURNING glitch with Orange Mail app
Bug quietly slurps PAYG credit - yet EE denies it exists
Like Google, Comcast might roll its own mobile voice network
Says anything's possible if regulators approve merger with Time Warner
Turnbull leaves Australia's broadband blackspots in the dark
New Statement of Expectations to NBN Co offers get-out clauses for blackspot builds
Facebook claims 100 MEEELLION active users in India
Who needs China when you've got the next billion in your sights?
Facebook splats in-app chat, whacks brats into crack yakety-yak app
Jibber-jabbering addicts turfed out just as Zuck warned
prev story

Whitepapers

Designing a defence for mobile apps
In this whitepaper learn the various considerations for defending mobile applications; from the mobile application architecture itself to the myriad testing technologies needed to properly assess mobile applications risk.
3 Big data security analytics techniques
Applying these Big Data security analytics techniques can help you make your business safer by detecting attacks early, before significant damage is done.
Five 3D headsets to be won!
We were so impressed by the Durovis Dive headset we’ve asked the company to give some away to Reg readers.
The benefits of software based PBX
Why you should break free from your proprietary PBX and how to leverage your existing server hardware.
Securing web applications made simple and scalable
In this whitepaper learn how automated security testing can provide a simple and scalable way to protect your web applications.