Feeds

Ofcom says no to automatically renewed contract badness

Telcos banned from rollover contracts with leaving penalties

Choosing a cloud hosting partner with confidence

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.

Internet Security Threat Report 2014

More from The Register

next story
Mighty Blighty broadbanders beg: Let us lay cable in BT's, er, ducts
Complain to Ofcom that telco has 'effective monopoly'
Download alert: Nearly ALL top 100 Android, iOS paid apps hacked
Attack of the Clones? Yeah, but much, much scarier – report
Broadband sellers in the UK are UP TO no good, says Which?
Speedy network claims only apply to 10% of customers
Yahoo! blames! MONSTER! email! OUTAGE! on! CUT! CABLE! bungle!
Weekend woe for BT as telco struggles to restore service
Fujitsu CTO: We'll be 3D-printing tech execs in 15 years
Fleshy techie disses network neutrality, helmet-less motorcyclists
Facebook, working on Facebook at Work, works on Facebook. At Work
You don't want your cat or drunk pics at the office
Soz, web devs: Google snatches its Wallet off the table
Killing off web service in 3 months... but app-happy bonkers are fine
prev story

Whitepapers

Why and how to choose the right cloud vendor
The benefits of cloud-based storage in your processes. Eliminate onsite, disk-based backup and archiving in favor of cloud-based data protection.
Forging a new future with identity relationship management
Learn about ForgeRock's next generation IRM platform and how it is designed to empower CEOS's and enterprises to engage with consumers.
Designing and building an open ITOA architecture
Learn about a new IT data taxonomy defined by the four data sources of IT visibility: wire, machine, agent, and synthetic data sets.
How to determine if cloud backup is right for your servers
Two key factors, technical feasibility and TCO economics, that backup and IT operations managers should consider when assessing cloud backup.
Reg Reader Research: SaaS based Email and Office Productivity Tools
Read this Reg reader report which provides advice and guidance for SMBs towards the use of SaaS based email and Office productivity tools.