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back to article Ofcom looks at contract opt-outs as users rage over price hikes

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 …

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Leave it alone ofcom

All they will do is raise prices on all new contracts. There by all customers lose out, not just those that didnt read the contracts terms.

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Re: Leave it alone ofcom

Theoretically there's a competitive mobile market, so at least one of the operators should buck any attempt to raise prices, figuring that extra potential subscribers will more than make up for the extra risk.

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Re: Ordinarily, I'd be inclined to agree

However, the monthly subs from existing subscribers is pretty much money for old rope. Someone on a £30 per month contract isn't going to be costing you much as a network but they're still paying £30 per month. And when they go over their plan, or on their holidays, they sometimes end up paying you a lot more (bearing in mind roaming is still a license to print money, even within Europe).

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Stop

Re: Leave it alone ofcom

Absolutely not.

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.

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Re: Leave it alone ofcom

An option I did not see:

I agree that they should not be giving out contracts for lengths they can not account for. Line rental call prices should be fixed for the contract. If the price needs to change the following should occur.

1) The user is allowed to walk away from the contract

2) If phone is subsidised, return undamaged or pay off the phone to leave.

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Re: Leave it alone ofcom

Quite so, you sign into a contract - even for 2 years the cost should be fixed for the duration - no question. If the operators want more money - tough! If their costs go up - tough!

If you can't forecast for 2 years ahead don't offer 2 year contracts.

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Re: Leave it alone ofcom

You're right, but what will happen in response is that all contracts will increase in price.

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Meh

Theoretically

The rights within a contract should be balanced. It should not give one party extraordinary rights over the other to the detriment of that party.

For far too long companies love to put clauses into their contracts which pretty much mean 'we can do anything we want to to, and if we amend you're contract, however detrimental it might be to you, you shall have no rights to complain or get out of the contract'.

Now Please Sign Here To Agree.

It's never been challenged properly in a court, maybe it's time to draw the line. However there are too many interest groups, politicians and money going into back pockets paid by big business that it is unlikely anything will ever be done about it.

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Re: Ordinarily, I'd be inclined to agree

I think many people would prefer it if their allocation of minutes/texts was flexibly altered rather than have the prices go up.

I want to know what I have to budget for but I could happily accept, say, a reduction from 1000 minutes a month to 900. The phone subsidy element is already taken care of and this would allow them to manage their costs effectively. Some people may go over their allocation (and pay more of course) but at least the rest of us would have the option of calling less to keep costs the same.

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Anonymous Coward

Re: Leave it alone ofcom

"Theoretically there's a competitive mobile market, so at least one of the operators should buck any attempt to raise prices, figuring that extra potential subscribers will more than make up for the extra risk."

You'd think so wouldn't you. In reality though, it unfortunately works more like a cartel where if one carrier risks increasing their prices (it's a risk as, as you said, customers could go somewhere else), other carriers will do the same in response, as they've been shown that the market can bear the price rise, i.e. everybody wants a slice of the pie.

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Re: Ordinarily, I'd be inclined to agree

"I think many people would prefer it if their allocation of minutes/texts was flexibly altered rather than have the prices go up."

Removing minutes and texts doesn't gain the network anything. The infrastructure is largely paid for and the data transmission isn't really costing them anything. If the networks want to raise the ARPU of their customers, the only option available is the extraction of cold, hard cash.

Fortunately, it *is* a competitive market with no cartel in operation, so it's not like the networks would all do it at the same time.....

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Re: Ordinarily, I'd be inclined to agree

"Removing minutes and texts doesn't gain the network anything. The infrastructure is largely paid for and the data transmission isn't really costing them anything. "

Surely then they could offer more minutes/texts in compensation for the price rise, although changing the price pretty much defeats the purpose of signing a contract in the first place.

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Alert

Unfair contract terms are not enforcible

For far too long companies love to put clauses into their contracts which pretty much mean 'we can do anything we want to to, and if we amend you're contract, however detrimental it might be to you, you shall have no rights to complain or get out of the contract'.

Google "unfair contract terms".

Then tell your service provider that you consider whatever terms of the contract that they are using to increase your charges to be unfair (in the legal sense). Offer to continue to pay at the original rate. Tell them to take you to court if they won't accept that.

An RPI-linked increase is probably fair (if mentioned in the contract you signed). An increase caused by a new government regulation might be fair, if they can justify that the increase is merely passing on increased costs imposed on them. I very much doubt that anything else would hold up in court. Most people are too easily intimidated!

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Happy

Re: (Don't) Leave it alone ofcom (See I fixed that for you)

The answer is easy, just delete 'fixed term contract' and substitute 'Capriciously Variable in our favour, we guarantee to shaft you for a set period contract'.

English contract law used to cover binding agreements to supply something for an agreed price unless blocked by law or act of God. Not just until the Christmas party fund needs more cash or some similar desire for more cash.

If sillyphone find that the cash flow is not right they have an easy answer, they got it wrong; or call in the act of God clause, frustrate the contact and we all go home happy.

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Kick them where it hurts Ofcom

Contracts should be fair to both parties.

I don't see why I should get screwed over because some phone operator feels like they are entitled to my money.

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Anonymous Coward

They already have right to walk...

... if the terms fall foul of the Unfair Contract regulations.

Particularly if the contract that was originally signed referred to additional terms and conditions that were not available at the time (e.g. if they were on a web page).

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Re: They already have right to walk...

Indeed they do. I've faced off a telco in that way - they blinked first! They hate it when it looks like you'll put up a fight.

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Re: They already have right to walk...

Do you mean to say that there are people who will sign a contract without obtaining a copy of what they have signed? ALWAYS get such, and always keep it for the duration of the contract. If it's a web-based sign-up, download the T&Cs that apply and print them, or e-mail them to yourself (the latter probably better because it creates a time-stamp maintained by a third party that they'd find it hard to argue about).

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Bucking the trend

> leaving network operators in the impossible position of being unable to raise prices against rising costs

Kinda strange, when IT equipment almost always GOES DOWN in price over the years. Sounds more like a case of charging what the market will bear, than trying to make any savings or efficiency improvements - which you'd expect in a truly competitive industry.

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Re: Bucking the trend

"leaving network operators in the impossible position of being unable to raise prices against rising costs"

Or simply locking in their price for as long as the contract term is fixed/accepting the contract is void if they change the amount of compensation they want? It can't be that hard surely. A smart operator would use it as a marketing opportunity "our contract prices are guaranteed for the minimum term of the contract" and a sales opportunity (make it widely known the price hikes happen every e.g. June and reap the benefits of people jumping onto contracts in May before the rise.)

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Holmes

It works two ways

leaving fixed term contract staff in the impossible position of being unable to raise prices against rising costs.

Funny, I don't hear many network operators complaining about that one.

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Re: Bucking the trend

Costs per user are steadily rising as I understand it - more and more data needs more and more bandwidth, bought from fixed line providers like BT or Virgin. The kit costs less but they have to buy more and more of it and find places to put it.

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Re: Bucking the trend

Costs rising due to data needs ?

I have paid for my data as part of the contract, this is something the telco needs to worry about not me.

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How about...

... 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.

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Re: How about...

That sir, is genius! Have an up vote!

It's sensible, well thought out, and would provide clear pricing to the consumer and I really wish it would come to pass, unfortunately those are one of the 2 sets of factors I can think of why the networks would never do it.

The second reason is that it would cost them money.

At the moment most networks offer contracts that are for instance 24 months long costing £36 a month including x amount of minutes/texts/data. On top of this they say you can have any of this range of handsets for free, or pay up front for a different one.

If you pick a handset that costs them £100, you still pay £36 per month for 24 months.

If you pick a handset that costs them £50, you still pay £36 per month for 24 months.

Where did that extra £50 go? Did they give it to you as an incentive for picking the cheaper handset? Did the factor it in as a discount on your bill? Nope, they just kept it in their pocket.

I wish your idea existed and was commonplace though, because not only is it brilliant from a clarity and financial perspective, it would also eliminate the abstract form of robbery described above. Additional it might help get a better range of handsets available.

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Happy

Re: How about...

Not sure if Tesco direct and places like that do "credit" for their phones and stuff but if you really want an iThingy and want it unlocked so you can use any operators SIM in it then you can get one direct from Apple (with interest free credit if I recall) There must be other stores that sell android winpho stuff without being affiliated with any operator?

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Re: How about...

If loans weren't so expensive nowadays (I swear the APRs have doubled in the last couple of years) then it would probably pay to do this yourself. It may still do if you shop around for a decent loan deal. (I've not looked seriously so they might be out there) .

If you can pass the credit rating to get a 24 month phone contract I doubt you'd have much trouble securing ~£500 over, say, 12 months. Certainly what I would [will] do if I couldn't [can't] afford a to buy a new phone outright and need one for some reason.

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Re: How about...

@Cameron Colley

Re: loans being expensive - you're not thinking about it the right way. Take out 2 credit cards, of which one has an interest free period for balance transfers for 12-18 months (not really intrest free, more like 3% for 18 months due to the transfer fees, but either way, it's pretty low interest for an unsecured loan). Buy the iThingy with the other card, then immediately transfer the balance to the one with "interest free" balance transfer period.

Lo and behold, you have procured yourself a low-cost loan for your iThingy and can now simply use a PAYG SIM or sign up for a £10-£15/month SIM-only contract.

It's not exactly difficult, but if people stopped to think about these things they'd not be good, obedient consumers prone to buying shiny that they don't actually need the vast majority of time. And where would our economy be if people didn't buy loads of stuff they don't actually need... Oh wait...

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Re: How about...

@Cameron Colley

Have you considered sticking 85 quid a month in a savings account for six months?

At the end of that period, you have a little over £500 in readies and can buy whatever you want with it, no longer needing to concern yourself with obscenely expensive contracts and free to go with a genuinely unlimited data SIM from Three or giffgaff or even O2, god help you.

You could drop the 85 quid to 43 quid and make it a year (or an ebay purchase or a cheaper phone) if you so chose, too.

The best tech is always the next tech. Ignore fanboys of all persuasions and remember your grandad. If you want it, save up for it.

It's way cheaper than credit.

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Re: How about...

It's a good thought, but....

Operators get a massive discount on handsets. They buy them for half what you or I could. The net result being that if we bought our own, we'd end up paying more. Introducing another commercial entity to lend you the money to buy the phone also means another party wanting to make a profit, which would also cost you more.

My approach? I have a basic Nokia that I bought new for £50 and a monthly tariff that costs me £20 for mine and my wife's phone and an allowance of minutes and texts greater than we use. I have 100MB Internet for emergencies but if I need to use the Internet out and about have free unlimited WiFi from my ISP.

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Re: How about...

Of course the telcos won't go along with your business model.

Their present approach relies upon confusion to differentiate between what are, really, identical products.

Answer is EU directive to force separation of hardware sales from airtime so that costs are more transparent and a more efficient market develops, with subsequent savings for consumers -- and landfill created by "free" phone upgrades is reduced.

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Anonymous Coward

Re: How about...

Moreover, most people don't renew or downgrade the contract at the end of the fixed term so continue paying for the phone even after it has been fully paid off - and all that is just pure profit for the operator.

At the very least the repayments for the 'free' phone should be unbundled within the contract so that the monthly fee drops when the implicit loan is paid out.

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FAIL

"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.

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Right.

And of course they would be able to raise costs anyway - if there was genuine need they'd all be obliged to do it and we'd only be able to walk away from one contract and into another that had seem a similar raise, very few people would give up a mobile phone altogether.

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Yuck, 2 year contracts

No thanks.

I know most folks like the "free" phone model but buying up front lets you switch provider and call plan whenever you like. Far nicer.

Also the number of people I hear muttering about having made a terrible choice of phone and now being stuck with the damn thing...

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Re: Yuck, 2 year contracts

While your principal is some what true, a great many of us can't afford up to £500 for a new handset.

It's also damn near impossible to get a personal loan for less than £1000 that can be paid off over 12 months or more. 12 month loans for £500 are available but at interest rates that make them impractical for phone purchases.

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Re: Yuck, 2 year contracts

It's actually remarkably easy, and in fact in many cases can be significantly cheaper than a standard loan. Simply apply for one of the many credit cards offering 12+ months interest free on purchases, buy your device, set up a direct debit to pay enough each month to clear it before the interest free period is done and at the end cancel the card so you can apply again to that company as a new customer a year or so later. If you want to be really clever you could engage in a wee bit of arbitrage by just paying the minimum each month and shoveling the rest into an interest bearing savings account until it's time to clear the card.

I have not only done this with phones, but with PCs and even my car. It's the cheapest finance you will ever get.

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@Gordon Lawrie

Doesn't having multiple credit cards over short periods eventually wreck your credit rating?

I've often considered this approach, but worry too much about missing a payment, and thereby getting stung with some hideous interest charge, and so have avoided it, so far.

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WTF?

£500 for a new handset.

How the fuck does a small piece of consumer electronics built in a sweat shop in China cost £500???

Oh I forgot the Gross Profit Margin of 46.0%

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Anonymous Coward

Re: Yuck, 2 year contracts

The only reason I did it was I worked out the extra cost over 2 years for the phone + contract was £240, and the phone I got was worth over £500, i.e. I saved ~£260 by taking a 24 month contract.. If it had been cheaper the other way round, i would have done that.

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FAIL

Re: £500 for a new handset.

Margins are usually around 40-50%....

it is the only way retailers make money, either selling few expensive items, or selling many cheaper items...

Clearly you have no idea about the world of retail or business if you complain about these prices....

But I do know iPhones have one of the higher margins out of the phones available...

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Re: @Gordon Lawrie

You would think... but no. My credit "score" is north of 950 (out of a possible 1000.) 750 is the UK average. Credit card companies care about one thing, making money. They do this not only through interest charges but also via the discount rate they charge merchants for accepting the card. Not all cards cost the same to accept either, costs differ both across brands and the type of card.

Generally the more "prestigious" the card and the more perks it offers the holder the more the merchant pays to accept it. Of course merchants generally are not allowed to say that they will take a basic Mastercard but not the Super-Globo-Deluxe Airmiles Titanium Mastercard so all that happens is that the cost gets built into the goods, allowing those who pay by cash or debit card to subsidise credit card users.

The end result is that the credit card company still makes a profit off of my account so are still happy to have me as a customer, albeit probably not as happy as if I had incurred extra charges. The answer to not missing a payment is to set up a direct debit for the minimum. On something like a phone purchase that's only going to be about £5, that way even if you forget to do it manually you're not going to get stung.

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Re: Yuck, 2 year contracts

Quite agree. Stopped locking myself into contracts 4 years ago and haven't looked back. Add in that each unlocked phone I buy each year get's sold on to further reduce my outgoings and jobs a good'un.

In the last year i've switched phone contracts 3 times. Once from T-mobile when they changed their PAYG terms from 3GB a month FUP to 500MB a month (seriously? that only lasts a week); then on to Giff-gaff which lasted all of 3 weeks before the constant data drops finally pissed me off to change; finally on to 3 which (touch wood) I have to say has been a very pleasant experience with my truly unlimited data (no FUP, I phoned to check) and they haven't minded my 1.5-2GB data use per month.

My contract costs me £15 a month and the handset costs me around £250 per year (this years handset is the LG Optimus x4) including the £60 for selling my old handset (an immaculate HTC Desire Z). Some handsets are kept longer than a year, if nothing takes my fancy and/or I don't see any need to upgrade after a year.

People buying bundled phones are being ripped off, it's that simple.

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Re: Yuck, 2 year contracts

"While your principal is some what true, a great many of us can't afford up to £500 for a new handset."

Some schools of thought would suggest that if you can't afford a £500 phone, then you shouldn't be getting one! You can get a phone for next to nothing, if you don't want the latest and greatest fashion accessory smartphone

I bought my Samsung galaxy 2s upfront and have a 1 month, very cheap, sim only contract. Overall much, much cheaper than getting one "free" on a contract. in future, when i come to upgrade my phone, I'll just buy the phone... it's one of the benefits of having a decent tech job with plenty of overtime opportunities.

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WTF?

Re: Yuck, 2 year contracts

It's also damn near impossible to get a personal loan for less than £1000 that can be paid off over 12 months or more. 12 month loans for £500 are available but at interest rates that make them impractical for phone purchases.

Boggle

Provided you are credit-worthy there are many credit cards you can apply for that have 0% interest on purchases for 13 months or longer. Tesco was offering 16 months last time I looked. Just don't forget to set up a standing order to make the minimum repayment each month, and a savings account to acquire enough cash to clear the debt when the interest-free period ends.

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Facepalm

Re: Yuck, 2 year contracts

Then buy a £50 feature-phone. If you can't afford it, don't buy it. Your mindset will leave you broke for the rest of your life getting shafted by companies taking advantage of your inability to resist shiny tat on stupid loan arrangements.

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Re: Yuck, 2 year contracts

@Phil W:

Heavens forbid that we should all just live within our means in the first place.

If you are after an Android phone, there is plenty of choice from juset below £100 on PAYG (for example, but not limited to, Orange San Francisci or Monte Carlo, not to mention others available new or used from the likes of CEX and on eBay).

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Headmaster

Operators should be able to fix contract rates by appropriate finance

Say I sign up to a 24 month contract at £25 per month (i.e. £600 commitment) and get a free shiny new i-Thingy valued at £400. In principle the operator has to borrow money to pay for the i-Thingy now, but they can easily do this at a fixed rate if they choose.

So out of the £25 pm about 2/3 of it can be a fixed cost to the operator. The remainder is the cost of providing the service and is subject to inflation - but this can be estimated fairly accurately (or could be hedged if the operator chooses).

It should not be difficult or that costly for the operator to offer the service at an almost known fixed cost to himself, so why do they need the flexibility to vary the charge ?

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Re: Operators should be able to fix contract rates by appropriate finance

This is true, but fixed rate financing is on average more expensive than variable rate financing. A fixed rate loan is a variable rate loan plus a hedge against changes in interest rates, and that hedge costs money. It's cheaper to take out variable rate financing. If you can then pass that variable rate onto the customers through these sorts of price changes, you have essentially managed to receive the hedge for free, as the risk has been assumed by your customers. This is why the networks like to do it this way.

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Mushroom

Inflation red herring

On the face of it it seems to make sense that an inflation adjustment should be allowed.

But the biggest cost to the network is the £500 handset you get at the beginning. and they buy that at the beginning. it's price can't go up after they've bought it.

as for everything else the costs to the network come down all the time. look at the price of network infrastructure and tell be that the prices have ever gone up. yes they need to add more and more bandwidth and so on, but not for me, i've agreed how much i can have for 2 years. their cost of supplying that comes down.

the answer is obvious. you increase prices for new customers only. you stick to the agreement you make.

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