Ofcom to investigate price rises on 'fixed' mobile phone contracts

Ofcom has received 1,600 complaints from consumers whose mobile bills have risen despite being on 'fixed' contracts

Mobile phone companies could be banned from raising people's bills mid-contract after Ofcom said the existing rules potentially "harm" consumers.

The regulator's announcement that it will consult on how to protect people on "fixed" mobile phone contracts from unexpected price rises comes days before Vodafone puts up bills for about 10 million UK customers by up to £1.55 a month.

The increase, which takes effect on 1 November, follows on from rises imposed by Orange, T-Mobile and Three and was branded "shocking" by consumer organisation Which?.

Most consumers are unaware that mobile phone companies can increase prices mid-term after someone has signed up to what they thought was a fixed price for a specified period, typically two years. Consumers are usually unable to cancel without paying a fee, unless the increase is above a certain amount.

Earlier this year Ofcom launched a review into the fairness of some contract terms. It said this "has identified a number of issues with the effectiveness of the current rules with which communications providers have to comply, and the potential for consumer harm".

The regulator said it would look at whether price variation terms in fixed-term contracts were "appropriate", and at the transparency of existing terms and the information provided to consumers when they buy a mobile phone.

The consultation, which Ofcom aims to publish by the end of the year, will also take in fixed contracts for landline and broadband services.

Ofcom has received more than 1,600 complaints from consumers regarding the matter in the space of a few months, and Which? submitted a formal complaint.

A spokeswoman for the regulator said: "Some consumers felt communications providers should not be able to impose price increases during the life of a contract, and if they do the consumer should be able to exit the contract without penalty. Others complained specifically about the amount of the price increase and how it would impact them."

Vodafone is increasing monthly bills by up to 2.4% next month. The average price rise a month is 59p, while the minimum increase is 15p and the maximum £1.55. This move is estimated to raise tens of millions of pounds for the company, which in May reported profits of £9.5bn for the year. In October 2011 Vodafone "simplified" customer bills by rounding them up to the nearest 50p.

Orange's 4.34% rise for existing pay monthly plans took effect in January, while T-Mobile's 3.7% rise took effect in May and Three increased pay monthly contracts by 3.6% in July.

Under current Ofcom rules, firms are required to give a minimum of one month's notice of any change to their terms that is likely to be of "material detriment", in which case customers must be able to walk away from their contract without penalty.

But campaigners say the problem is that this material detriment is not clearly defined. For example, Vodafone states a customer will usually only be able to get out of their contract if any changes increase their monthly costs by more than 10%. So far, the firms appear to have successfully argued that terms such as this do not fall foul of the rules.

Claudio Pollack, Ofcom's consumer group director, said: "Ofcom understands the frustration consumers feel when faced with price rises in what they assume to be a fixed contract with a fixed price.

"Having considered the large number of consumer complaints we will soon consult on ways to address consumer concerns and ensure they are being treated fairly in this area."

Which? executive director, Richard Lloyd, said the announcement was encouraging news for the 32,000 people who had backed its Fixed Means Fixed campaign. "We hope Ofcom will now act swiftly to ensure mobile phone companies are made to drop hidden clauses in their contracts that allow them to hit consumers with millions of pounds of unexpected price increases."


Rupert Jones

The GuardianTramp

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