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Ofcom to address mid-contract price hikes

Plans 'exit without penalty' option for consumers

4G smartphone

Ofcom has announced plans to protect consumers from mid-contract price rises for landline, mobile and broadband customers.

The mobile regulator has launched a consultation on how better to protect consumers from unexpected price hikes. Ofcom's favoured approach of the options put forward is an 'exit without penalty' rule. See also: Ofcom announces 5G plans for beyond 4G.

This would allow consumers to leave a contract if their provider introduces a price increase before it has ended.

Ofcom said: "Alongside this, Ofcom would expect providers to be clear and upfront about the potential for price increases and of the consumer’s right to cancel the contract in the event of any price increase."

See also: 4G vs 3G network hands-on speed test.

The purposed change would address the existing problem that providers can increase prices while consumers have little choice – either accept the increase or pay a charge to exit the contract. The only exception is where a provider agrees that the price increase would be likely to cause 'material detriment', according to Ofcom.

Three other options are being included in the consultation, one of which aims to tackle the lack of transparency around potential price increases. The other options are to introduce guidance on how providers should interpret and apply Ofcom's rules and consumer protection laws, and a method where consumers would have to actively 'opt-in' to a variable price contract.

What is 4G? A complete guide to 4G.

Ofcom also considered a complete price increase ban for fixed contracts but the regulator didn't think it would sit alongside the European legal framework so didn't present it as an option.

Ofcom is inviting views from stakeholders on all the options put forward for consultation to address this issue. The consultation will close on 14 March 2013 and Ofcom said it expects to publish a decision in June.

Follow Chris Martin and @PCAdvisor on Twitter.

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