Mobile phone price rises: should Ofcom stick to its guns?

by , Campaigns Officer Technology 25 March 2013
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A lot has happened since we launched our Fixed Means Fixed campaign. Our formal complaint led to Ofcom launching a consultation on price rises during fixed contracts – and your views were integral to our response.

Fixed Means Fixed supporters cartoon

Ofcom’s consultation into price rises in the middle of fixed contracts closed last week. We’ve handed in our response and we await the outcome with baited breath.

What’s important in this is the role you’ve all played. The thousands of comments made here on Which? Conversation formed a key part of our response to Ofcom’s consultation. Fixed Means Fixed is a campaign driven by consumers, so here’s to you for helping us tell Ofcom to do the right thing.

There’s only one option that makes sense

Poll results for Ofcom consultationSo, how did we respond? Well, four options were presented in Ofcom’s consultation. Three of them, ranging from doing nothing to greater transparency of price rise terms, didn’t quite fit the bill. For instance, although we want companies to be clear about price rises, that wouldn’t change the fact that customers don’t have a chance to avoid them. Hikes have been imposed by all the major mobile providers (O2, Vodafone, Orange, T-Mobile and Three Mobile) after all.

However, Ofcom’s fourth option – allowing customers to exit contracts without penalty if providers hike prices – hits the mark. We’ve always thought that the price should stay fixed from the day it’s agreed until the end of that agreement. And if providers don’t want to keep their end of the bargain and prices do change, you should be able to legally leave without having to pay an exit penalty.

And you agreed with us. When we put all the options to you in a survey, you were overwhelmingly in favour of option four – 91% of more than 5,000 voters went for it.

Redressing the balance of power

We think option four would give you greater power and freedom to vote with your feet. You could trust the price you signed up to, and if prices do increase you can reject it and switch providers.

Moreover, it could act as an incentive for providers to stick to the advertised price throughout the contract in order to avoid losing their loyal customers to their competitors. All in all, we think that option four would change the balance of power and should lead to an environment where you get what you signed up for.

So, thank you for all your help with our Fixed Means Fixed campaign and for being a key part of our response to Ofcom. We’ll be keeping up the pressure on your behalf while the regulator considers what it does next. But in the meantime we still want to hear from you – do you think Ofcom should stick to its guns and implement option four?

33 comments

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wavechange

This is great news but the top priority is for the phone companies to be banned from raising prices during a contract. Nothing less will do.

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peter t

I absolutely agree, why did Ofcom not offer this option? Are they funded by the very people who they regulate? Do their members have a conflict of interest because of investments or directorships in mobile phone companies? Or are they just scared of the power that these monolithic companies have these days, given that a mobile phone has become a virtual necessity in today’s world? Who knows, with the sleaze and corruption in politics and the media today, anything is possible!!!

I emigrated to Yorkshire 25 years ago and work for myself in the construction industry and have become all to familiar with a business practice I first encountered up here known as the “Fixed price, variable specification” contract (also much loved by that other industry of repute namely Estate Agents).

I guess with globalisation and diversification in business, the mobile phone companies may have learnt this wheeze from business associates in the construction industry :-) )

Am I surprised?……….. I think you know the answer to that one :-) ))

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william

Yes I voted, but I didn’t really see the option I would have preferred, e.g. A fixed contract should stay fixed for the term ( except for VAT changes). All the options seemed to be about getting out after a rise, which in theory there shouldn’t be.

And could you re list what the actual options were, as I’ve voted I can’t see them anymore.

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wavechange

From the Which? response to the Ofcom consultation (link above):

The four options presented by Ofcom were as follows: 1. Make no changes, 2. Require greater transparency of price variation terms, 3. Consumers have to expressly opt in to price rise contracts and 4. Allow consumers to exit contracts without penalty.

The introduction would be more helpful if this information was included.

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peter t

Just as a matter of interest would these very one sided contracts fall under the “Unfair Terms and Conditions Regulations 1999″? It would seem that it might be an avenue to explore given that Ofcom is obviously running scared of the companies they regulate.

Come on Which? only you have the clout and resources to pursue a case that way, if it is possible

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Anon the mouse

Yes they do. And also good faith in contracts applies too

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Keith C

Is it just me or has anyone else been hit for a SECOND increase on the same contract?

I phoned T-mobile who said that the contract allows them to do that as inflation had gone up this year. So we can expect an increase year in year out! I`m sure most of the providers don`t have yearly contracts with their suppliers as they would spend forever re-negotiating – most likely have nice 5 year fixed deals so costs can be predicted well in advance

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Steve Hayes

Me too, a retail contract for a term of 1 or 2 years should just be for a fixed price. Come on Which, don’t settle for such a weak getout.

As for the options, actually option 3 is much more to the point; I can only imagine it was beadly explained, because it says that the price is fixed unless you actually accept a price change, which is a better version of option 4

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Sean

And the name of the campaign again was what… “Fixed Means Fixed”?

I guess that must be the non-existent Option 5…

Well I vote for that one… or at least I would have done had I even been made aware of the survey in the first place… way to go Which?

Such clarity… such strength of purpose… such determination… such a load of old hogwash.

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fordy

I must admit that I went for option 4 only because more worthwhile option 5 was missing…..
I feel that everyone that has paid any tariff increases during their ‘fixed duration for a fixed price’ deal should of got their overpaid money back & have their contract honoured as signed. FIXED MEANS FIXED! This you would think would send a more worthwhile message to the providers? Hit THEM in the pocket! Will make them think twice next time……….

HOW LONG WILL ANY DECISION BY OFCOM (& IMPLEMENTATION) TAKE NOW?

Will anyone be left under contract by then?

I’m not a happy consumer!!

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David Butcher

I’ve just left Orange after being with them almost since the start. Seems a bit like a divorce but in the end I decided enough was enough. No respect for their customers. They were great at the start. Now they have just about the worst customer service I have ever encountered. Well ok, that’s ignoring the long lost and abysmal ntl !!!

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John

Maybe a complaint to the Avertising Standards people is also needed, the more hassle they get the better and it does not hurt to chivvy the beauracrats into doing their job.

Hello everyone, just on the point of removing price rise terms altogether – Ofcom ruled out this option from the beginning. Ofcom felt it would not legally be allowed to stop companies from increasing prices because Article 20(2) of the EU’s Universal Services Directive says consumers have the right to withdraw from their contracts without penalty upon notice of modification to the contractual conditions. Option 4 will mean that when there is a price rise, your original contract has changed, meaning you are now free to get out of it which we think will deter companies from doing this.

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Steve Hayes

Did option 3 mean that the customer had to do something and if they didn’t the supplier was stuck with the old price?
or did it mean somewhere on page 5 of the small print they have a clause which says fixed means variable?
or what please?
Thanks

Option 3 meant that you’d have the choice to have a fixed contract or you could opt-in to variable price contract.

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Steve Hayes

If you’ll forgive me, that does sound like all contracts will be variable price, as per para 117.f.u.

That may be. We didn’t back option 3 as it only removes the element of surprise and could add complexity to already complex tariffs.

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william

If that’s the case then surely the obvious answer is to ban phone companies from using the word Fixed or even implying that a contract is fixed if they’re never going to be.

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wavechange

According to Ofcom’s website, ‘Ofcom is funded by fees from industry for regulating broadcasting and communications networks, and grant-in-aid from the Government.’

If they are partly funded by the industry, I’m hardly surprised that they are not paying attention. It would be better if Ofcom was independent from the companies and the cost of running Ofcom was government funded, through taxes on the companies operating in the field.

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Mark

T-mobile did this last year as well, how can they be allowed to simply increase their bills mid contract year upon year. Increase the bill at the end of the contract and if the price is acceptable i’ll renew, don’t force me to either accept or pay 18 months of my remaining contract, that’s damn near blackmail. This company should be treated like Starbucks and shamed into rethinking its decision, sadly i fear they’ll continue to treat their customers as cash cows and no doubt March – May 2014 another ‘LEGAL’ price rise to show the contempt they have for their loyal customers

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Dave

I’m furious, I’ve just received a letter from T Mobile increasing the price of a ‘fixed contract’ by £1 but didn’t realise they could do this. This is even more of a kick to a public sector worker who hasn’t had a pay rise for 2 years. I would cancel my contract today if the penalties were not so steep. OFCOM must act now.

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Tracey

We have 3 mobiles on T mobile my husband took out a new contract at the beginning of March, because of the previous price rises mid contract he asked if new contracts are likely to be increased he was told that any new contracts from end of February would not be liable to price increases as a ruling by ofcom had prevented them from doing this…lo and behold he has had a price increase. This is so infuriating, my contract has had 2 increases in less than a year and the third contract has just been given a price increase also.

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Wayne

So many angry people over this – me included.

So many say “I’d cancel my contract if the fees weren’t so steep”

What do you think they’ll do if we ALL cancel our contract?
Take everyone to court??
Doubt it.

There’s a precedent to be set here, I for 1 will NOT be paying the extra, I’ve already phoned them and if nothing is done before my next direct debit date, that direct debit will NOT be leaving my bank.

They changed the contract, I don’t agree to it, that’s the end of the contract. No fees, no fines, no talking, just finished.

Thanks for your comments about T-Mobile – it seems many of you are getting your letters now. We’ve previously written about T-Mobile price rise here: http://conversation.which.co.uk/technology/ee-orange-tmobile-price-rise-fix-monthly-plan/

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pmunc6

I cancelled my contract and received a bill for £700+. I have responded that I will not make a decision on paying until Ofcom publish the outcome of their investigation. They are not happy with this but I was not happy to pay them an increased monthly charge after only 1 month into a 24 month – what I believed to be a ‘fixed’ contract.

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Mark

^ pmunc6 could you not have cancelled the contract for free as it was within your 30 day cooling off period?

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derek chalmers

after being messed around by three and 2 increases I switched to talkmobile big mistake . I have onlu been with them 6 months and I have just been advised that my 2 year contract that was taken out on sept 30th 2012 will increase by 3% I don’t imagine this will be a one off. very didappoint Ofcom allows this to happen

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jimedge

My pay monthly contract with Three which started out at £33 18 months ago is now £35 per month. Contract law primarily states that a contract must be equally binding on both parties, but mobile phone networks routinely add to the small print a rider that allows them to increase charges mid term (does anyone actually read the contract they sign?). Like any other retailer or service provider, mobile phone networks are bound by the Sale of Goods Act, which prohibits unfair terms. Surely this must be the unfairest term of all!

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AW

I renewed my contract in April 12 using my old tariff (when I upgraded) – it is an 18 month contract. I have just received a letter from T-Mobile saying that my Monthly plan is going up from £26.47/m to £32.80/m By my maths that is a 24% increase. When you look at the “FAQ’s” on the back of the letter under the “Why is it necessary to raise prices” it says that it is because of inflation and quotes that at 3.3%!!!!! I also note that they are really underhand in the question about whether I can cancel. My understanding is I can give notice with no penalties but they allude to there being a charge in an attempt to put you off that course of action!!!

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Jan

I took out a very reasonable two year contract with Talkmobile in October last year and I have had no reason for complaint until last week when I received a text advising that from next month my bill will increase by 20p a month. While this amount isn’t going to make much difference to my outgoings, I began to wonder how often these increases were likely to happen when I had thought that the amount I signed up to pay was binding on both sides for two years. I was therefore very interested to read that you have already registered a complaint with Ofcom and I look forward with interest to the outcome.

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Dhara

My situation is exactly same as Jan, when i emailed customer services, i have got standard reply from them ” From June 1st, 2013 your line rental will go up by up to 3.2% This is in line with the RPI rate of inflation, as provided by the office of national statistics.

Please see your terms below, which support this;

8.8. Your right to end this Agreement set out in Clause 8.7 does not apply if the increase to the Charges made under Clause 8.7.3 (calculated as a percentage) is no more than the increase in the Retail Prices Index Figure (“RPI”, also calculated as a percentage) for the period from the month of the last increase (if any) to the month before we send you notice of the change.

I do appreciate that this may come as a shock to you, and if this is the case, I do apologise. We’ve tried to keep the prices of our plans down for as long as possible, but due to the rise of costs within the economy, we’re no longer able to keep your tariff at its current cost.

The above changes wouldn’t create a clause for early cancellation ”

and people like us cant even cancel the contracts.

I hope OfCom will take againest this unfair charges from Talk mobile

On the other T-mobile confirmed me they will refund the price increase, which is very reassuring.

I hope talkmobil will listen to us as well….

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Dave

When are ofcom going to give their findings? It’s been far too long.

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Fordy

‘end of summer’……………………..2999.9!!

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