Ofcom looks at contract opt-outs as users rage over price hikes
Operators: The 'fixed' bit was supposed to be for you, not for us...
UK communications watchdog Ofcom is consulting on whether Brits should be allowed to pull out of any communications contract if the price changes, following widespread outrage at the practice.
The consultation proposes that any change in price would let customers off the hook, letting them walk away from contracts without penalty, so expect it to be fiercely contested by network operators - even if a quarter of those who complained to Ofcom were under the mistaken impression that their price was fixed for the duration of their contract.
Mobile and fixed operators regularly change their prices, generally in line with inflation or at least close to that, but 1,644 people complained to Ofcom in the eight months following September 2011 and most of those felt they had suffered "material detriment" from the increase, which many of them hadn't thought permissible.
"Material detriment" is key, as any change to the contact which causes such detriment allows the signee to walk, and has let many customers out of their contracts in times past, but small increases in price have hitherto been allowed to reflect inflation and other economic changes.
Ofcom's proposal (PDF, surprisingly hard to read) suggests greater transparency - telling customers what they've signed - or requiring customers to opt in to variable pricing, then dismisses both those options as flawed before concluding the only course of action is to lock pricing for the duration of the contract.
The problem is that two years is a very long time. Guaranteeing a price until 2015 is tough, but when that money is needed to subsidise the cost of the latest iThingy, it's even harder. One can imagine a round of inflation, perhaps next year, leaving network operators in the impossible position of being unable to raise prices against rising costs.
The consultation will be heated, but probably end up with fixed-price contracts, which might in turn keep the length down a bit (contracts are currently capped at two years) then we'll all end up paying slightly more in exchange for greater flexibility, and guaranteed outgoings, which is probably for the best. ®
Re: Leave it alone ofcom
If a carrier cannot foresee costs 24 months down the line then they should not be offering 24 month contracts. A contract should not be able to lock you in and then get charged whatever the operators whim decides, that is hardly fair.
"leaving network operators in the impossible position of being unable to raise prices against rising costs"
Funny that - I am similarly unable to reduce my mobile-related contractual obligations against similarly rising costs. How terribly sad I am to hear the operators might have to take the potential for such cost rises into account when agreeing to contracts! It's so unfair that they might be exposed to that risk like the rest of us are, the poor dears.
... splitting everything up?
Get a loan for an iThingy, which is fixed cost for the duration, and get a SIM-only monthly rolling contract or PAYG? That way the transparency is 100% complete, and the user is responsible precisely and only for what they signed up for.
Bundling the iThingy loan into the "contract" to obscure the actual cost of it is just a misdirection ploy to make people think they are getting a freebie when they are in fact not. It's a bit like the scene from Only Fools and Horses with Rodney trying to get into a casino but not wanting to pay the £20 entry fee, and the bouncer tells him "Tell you what, if you give me £20 I'll let you in for free."
Perhaps the solution is for there to be a specialist set of lenders that only lend money for mobile phone purchases, repayable over 12-24 months. That way the whole thing gets unbundled and there is no connection, implied or otherwise, between the device cost and the service contract.