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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  1. Mike Brown

    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.

    1. dotdavid

      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.

      1. Anonymous Coward
        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.

    2. Jason Hindle

      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).

      1. Matthew 3

        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.

        1. Jason Hindle

          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.....

          1. Sooty

            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.

    3. Anonymous Coward
      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.

      1. Ragarath

        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.

      2. mark1978

        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.

      3. Terry Barnes

        Re: Leave it alone ofcom

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

    4. LarsG
      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.

      1. Nigel 11
        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!

    5. Richard Jones 1
      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.

  2. Crisp Silver badge

    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.

  3. Anonymous Coward
    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).

    1. Will Godfrey Silver badge
      Thumb Up

      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.

    2. Nigel 11

      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).

  4. Pete 2 Silver badge

    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.

    1. auburnman
      Thumb Down

      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.)

      1. Field Marshal Von Krakenfart
        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.

    2. Terry Barnes

      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.

      1. Keith 20

        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.

  5. Gordan

    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.

    1. Phil W

      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.

      1. Andy ORourke
        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?

      2. Fihart

        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.

      3. Anonymous Coward
        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.

    2. Cameron Colley

      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.

      1. Gordan

        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...

      2. dogged

        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.

    3. Terry Barnes

      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.

  6. dotdavid
    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.

    1. Lord Voldemortgage

      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.

  7. David Hicks
    Thumb Down

    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...

    1. Phil W

      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.

      1. Gordon Lawrie

        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.

        1. Lamont Cranston

          @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.

          1. This post has been deleted by its author

      2. Field Marshal Von Krakenfart
        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%

        1. MrXavia
          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...

      3. Sooty

        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.

      4. Nigel 11
        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.

      5. RonWheeler
        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.

      6. Gordan

        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).

    2. Anonymous Coward
      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.

    3. EvilGav 1
      Thumb Up

      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.

  8. John Miles 1
    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 ?

    1. Michael Jennings

      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.

  9. nigel 15
    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.

    1. Charlie Clark Silver badge
      Thumb Up

      Re: Inflation red herring

      Indeed! A remarkably sloppy piece from Mr Ray who normally is bang on the money on the telcos. Obviously a bit to close to his sources on this.

      Inflation - in whatever measure RPI, CPI, etc. - is only relevant to policy or contracts that stipulate it. They only justification for increasing charges during a contract are costs imposed by statute such as, say an increase in VAT. Otherwise, inflation is a business-specific charge and not a problem for telecommunications. Contract costs come from the amortisation of existing equipment and licences, maintenance of equipment and staff.

      In a functioning market competitive pressure should prevent all operators from raising prices together. If operators are free to raise prices but consumers are not free to refuse such increases then the market is not functioning properly and Ofcom as regulator should step in and either reverse the increases or allow customers to leave. As the handsets are the sole property of the phone companies until they are paid off, Ofcom could help by making this clear in contracts so that the loan part of the contract can be maintained.

    2. jubtastic1
      Thumb Up

      Re: Inflation red herring

      Thanks for saving me the time to write that, can't believe it's so far down in the comments, from the article you might form the impression that everyone bought their phones at the same time then the poor telco had to try and survive for two years until the next payday, the reality is that there's a constant stream of new customers signing up and if the telco believes those customers are going to incur greater costs over the course of their contracts then that should be reflected in the price.

      Adjusting existing contracts to subsidise new customers is at best lazy and at worst criminal.

    3. EvilGav 1
      Thumb Up

      Re: Inflation red herring

      In one respect, you are quite right. The hardware costs all come down over time. Indeed any hardware over 3 years old had already been written off in accountancy terms (usually, unless the 3 year amortisation of IT has changed and i've not kept up with it).

      However, you seem to forget about all of the other side of the argument.

      The hardware doesn't all magically just work, it takes people to make it work. People are a cost that constantly increases (or you constantly replace them with worse and worse staff). If you don't own any/all of the property (for those staff and for the equipment), then the cost tends to increase over time.

      Having said that, I do agree that if you sign a contract for a fixed term, then the monthly price for the fixed term should stay the same - as should what the contract is for. Many companies have altered their FUP in the last year (mostly dropping from 3GB to 500MB a month), which apparently wasn't enough to rescind the contract - even though that was likely to place a large material burden on the contract signee.

  10. Timmay

    If you can't guarantee you'll be able to keep the same prices for the length of my contract, I can't guarantee my ability to keep paying it.

    2 years may be "a very long time" in the communications market (though when it comes to suppliers, I'd bet they all negotiate longer term deals, so I'd dispute that somewhat), but it's not like a mobile provider's customers ALL join at once, and so that company is left unable to do ANYTHING for the rest of the period - their customers join (and leave) every day, so just make any increases apply to NEW customers.

    1. Michael Jennings

      New customers have choice

      The trouble is that the networks have very little pricing power with respect to new customers, because there is a lot of competition and a customer can almost always get a cheaper deal somewhere else. Similarly, although a network is free to increase the price for customers who are out of contract and still paying (and I have no problem with this) they once again have very little pricing power for customers who are price sensitive. (Ring up your network, ask for a PAC code, and see how low they will go with the offers to try to prevent you from leaving). The only customers they do have pricing power over are the ones on fixed term contracts who cannot leave, assuming the regulator agrees that they can't leave. So they push it as far as they can.

      1. Charlie Clark Silver badge
        FAIL

        Re: New customers have choice

        The trouble is that the networks have very little pricing power with respect to new customers, because there is a lot of competition and a customer can almost always get a cheaper deal somewhere else.

        That is known as a market and they still have a great deal of pricing power as the various infrastructure deals, etc. have illustrated. Any company that offers a contract that will lose it money over time deserves to go out of business. As Mr Orlowski pointed out several years ago, companies that continue to emphasis selling phones over services are giving away much of their bargaining power. MVNOs with little or no shop-space selling phones should actually be in a very strong position for discerning customers.

        although a network is free to increase the price for customers who are out of contract

        er, you have a contract as long as you are still paying. Almost all such contracts have an automatic renewal clause that is triggered unless either party cancels the contract before a specified date.

        So, no sympathy for operators unable to do their sums.

        1. Anonymous Coward
          Anonymous Coward

          @ Charlie

          You are wrong.

          Mobile phone contracts do not have auto-renewal clauses. The practice is severely frowned upon by the courts and companies can be forced to change such 'unfair' terms in their contracts and be severely fined.

          BT was reprimanded by Ofcom in 2011 for doing this with landline phone contracts.

          The network operators in the UK do not (AFAICT) indulge in such underhandedness.

  11. jb99

    Nothing wrong with variable price

    I see nothing at all wrong with allowing price changes during the contract.

    Oh course that means I have just as much right to announce the price is dropping as they do to increase it.

  12. Michael Jennings

    Fewer subsidised handsets, I'd guess.

    You can get yourself a shorter contract (12 months for the best deals, but once month also) by simply going SIM only. If you do, the operators have only promised you the fixed price for a shorter period of time and are so less inclined to put the price up mid contract (plus there is no expensive handset to be paid off from the monthly payments, and issues like the highly inflation sensitive implied interest rate on the time payments for this don't come up) and the customer can go and find a better deal from another network much sooner if he doesn't like what he is being offered. So these sorts of problems are much less serious with SIM only / short contracts than with subsidised handsets / long contracts. If Ofcom enforces fixed prices as suggested here, it is likely to become more financially attractive to go SIM only rather than get a longer contract with a subsidised handset than it is now. Particularly if things like a Nexus 4 for £239 stay around (and stocks are large enough to be able to actually make it possible to buy one).

    The downside is of course that you have to pay the cost of the handset up front. Not everyone wants to or can do this. Going forward, though, those who don't are gong to increasingly pay more in total than those who do, I suspect.

  13. Anonymous Coward
    Anonymous Coward

    No, you've GOT to fund the next round....

    ...which will be the new frequencies being acutioned off.

    For which the mobile operators will happily pay a Kings ransom, which will stuff the Treasury's coffers even fuller. The mobile operators will happily go salong with that, safe in the knowledge they can claw their invenstent, and more, back by charging mug punters even more for their contracts.

    Forget "service" forget "progress". In the end, its all about yet another way of getting money out of the mugs.

  14. AlgernonFlowers4
    Meh

    Mean What You Say

    This way we can all have unlimited fixed price contracts which are capped with variable costs

  15. Micha Roon
    WTF?

    just take up an insurance

    If the banks can sell you CDS contracts I see no reason that an insurance could not sell you some sort of contract against inflation.

    Say, you calculate your costs with 2% inflation and it suddenly jumps to 6% in the second year: the insurance kicks in and pays the difference.

    In what universe is this complicated? It increases the price a bit, that's all.

  16. Atonnis
    Meh

    Goes both ways...

    I don't see a problem with the requirement to fix the pricing for the length of the contract - that IS, after all, why you're buying said contract, because of the price for the device and service.

    However, the relative remaining cost of the device should be payable on the exit of the consumer from the contract - unless the device is returned fully boxed and ready for refurbishment and resell.

    What they really need is a depreciation clause on the front page of the contract (in big writing) that states how much of the device is paid off each month, thus allowing the signer the option of paying off the rest of the device cost.

  17. Mad Chaz
    Paris Hilton

    Over the pond in the cold north

    Here in Canada, this was a huge problem a while back., as there wasn't even a limit to the term of the contract and it got abused badly. Here is how it was fixed.

    1: Fixed term contracts are now more or less a thing of the past. The operator is flat out no longer allowed to lock you in.

    2: IF they finance the phone for you, they have to be upfront about how much it the phone costs and how much of it is payed each month on your bill, as well as letting you know what the balance on said phone is. They are not allowed to charge interests on this I believe. (My provider doesn't anyway)

    3: If you decide to walk out, you have to pay off the rest of your phone and they have to give you a way to unlock it so you can use it on another carrier.

    Paris, cause she as no fixed contract.

  18. Anonymous Coward
    Anonymous Coward

    Basics: What Is a Contract??

    A contract is an agreement between two parties, right?

    In this case, one party, the network operator, agrees to supply comms services to the other party, the customer. The customer for their part agrees to renumerate the network operator according to the particular tarriff they sign up for.

    I have a big problem with the network operator changing the tarriff at will. In my view, that is changing the terms of one side of the contract - thereby invalidating the agreement of the other party.

    Presumably the contract must have some small print, indecipherable by the average customer, which says that the tarriff is flexible, otherwise the lock-in would not be enforceable in law.

    1. Lamont Cranston

      Re: Basics: What Is a Contract??

      Yup. Three took pains to direct me to the relevant small print on their website, when they decided to up my monthly charges. I gave them the benefit of the doubt, and assumed that this was what was written into the contract at the time I signed it, and promptly left them the following month (fortuitous timing, really).

    2. Keep Refrigerated
      Thumb Up

      Re: Basics: What Is a Contract??

      Well you get an upvote from me. I'm stunned at the amount of commentards here simply accepting that one party can change the terms of the deal anytime they like.

      Part of the reason the Unfair Terms in Consumer Contracts Regulations Act exists is to defend against this kind of predatory mentality, but so few know it even exists. Too bad consumer contracts usually mean signing a mandatory form rather than a negotiation.

    3. This post has been deleted by its author

    4. NATO
      Stop

      Re: Basics: What Is a Contract??

      Three don't actually have this properly written into their contract - the section they refer you to (4.3 I believe) simply says that they must give you 30 days notice if they raise your tariff by MORE than the RPI. There's nothing that actually says they can actually raise it (at all) without you being able to invoke the cancellation clause to withdraw from the contract.

      Orange etc, actually do have very specific clauses stating what they can raise it by, how often they can raise it etc, which is better than Three's stunt of just raising prices, pointing to some obscure, unrelated clause that happens to mention RPI and then refusing to accept any argument against it.

      The problem is that I really tried to fight Three over it, I wrote endless letters, I rang to Ofcom (who weren't interested as it was a 'commercial dispute'), and the Communications ombudsman wasn't willing to get involved either. The only avenue left was the Small Claims court who weren't interested because there wasn't an actual amount of money I was fighting for (I was simply fighting to have the contract dispute resolved with me being able to withdraw from it without penalty as stipulated in it).

      Ultimately Three are hiding behind their T&Cs and it's too difficult for the average man to challenge them without going down the expensive, risky legal route.

      Needless to say I've given up, but I cancelled my mobile broadband account immediately (1 month rolling contract) and *will* be leaving them at the earliest opportunity once my iPhone contract ends.

      1. Anonymous Coward
        Anonymous Coward

        Re: "small claims court weren't interested"

        What? The court is there to resolve disputes - anyone can raise a case. You don't have to get somebody "interested" - just pay the £30 fee.

  19. Roland6 Silver badge

    two years is a very long time - utter rubbish!

    "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."

    Sorry the writer obviously has no real world experience otherwise they would be familiar with all sorts of fixed price arrangements covering: cars, houses, energy and other complex products.all for terms that can often exceed 2 years.

    The writer should also take a moment to consider the history of mobile communications whereby over relatively short period of time we have seen the quantity of minutes/data increase whilst the price paid remains the same. For example my first contract with Orange ba ck in the mid 1990's was 15 minutes per month for £15 pcm, a quick look at current plans will show that the operators are giving significantly more for a £15pcm tariff. Whilst the changes over two years might not be so dramatic they still exist - I just renewed a 2 year contract and for no change in price have gained Internet access and 250MB pcm ... - funny how they never texted me whilst the 2 year contract was running to tell me that for the money I was paying they were prepared to give me more ...

    No, if an operator advertises and sells a tariff as "£10.50 a month (24 months)" then it is fixed price if they want to vary the amount then it needs to be sold as "£10.50( variable) a month (24 months)" or "£10.50 a month (24 months)* " where the star refers to a written description of the terms elsewhere in the advertisement - just like interest rates/financial products. Perhaps more people need to complain to ASA about mobile telco's misleading advertisements...

  20. Tezfair
    Unhappy

    Hmmm,

    Most of the replied here are regarding mobile contracts, however I think the article was more towards BT since they are the ones that have raised their rental rates this month.

    Ironically (and it being 30 years of the modern internet) our broadband has been off all day and its only because of the mobile that im still online. If I had better 3G or 4G down here in the sticks of SW I would drop BT as its only used for incoming calls and adsl.

    I have to make a mental note each month to make calls otherwise im charged!!

    1. Anonymous Coward
      Anonymous Coward

      BT

      BT already let you out of your contract if prices go up. It's a standard part of the contract.

  21. Steven Jones

    Decouple handset recover costs from data/call packages

    Why not enforce de-coupling of the costs of the so-called subsidised handsets from the call package itself. The handset recovery cost is completely predictable and that portion could be allowed to continue should the subscriber decide to walk if the call/data package prince increase during the period.

    Of course equipment promotional offers have been subsidised by artificially high termination charges into mobile networks for years. Effectively those on fixed line networks have been subsidising handsets for years on the basis that Ofcom has allowed these as promotional costs. That's a disgraceful situation which is taking years to be resolved (all so Ofcom can artificially promote the mobile market through cross-subsidies).

    As for the claim that mobile operators can't reasonably forecast their costs for a period of 24 months, then that's plain ridiculous (aside from VAT changes - which obviously don't need to be in the fixed charge part). Even if they are so incompetent as to be unable to do it, then that's just what's called a commercial risk.

    Of course the truth of it is that they want such retrospective pricing policy so they can adjust their cost recovery models to allow for the cross-subsidising of new customers from old with special offers.

  22. Wardy01

    This wouldn't bother me if ...

    ... when new phones hit the market I could just walk in to my local phone shop and buy one without a contract.

    Most of the time I notice that it's near impossible to get a new iThingy without a minimum 18 month contract.

    I agree with the idea of de-coupling the phone from the tariff, the consumer should be able to chose to buy 1 without the other if it suits them.

    As a bit of a tech geek I, like many always want the latest gadget but I don't want a 2 year contract with it and it's unfair to force this on me!

    I could go directly to the provider ... sometimes, but they usually direct me to my local mobile phone shop!

    Also @Roland6 has a good point ... service provision only gets cheaper over time ... this inflation talk is utter crap.

  23. dave 81

    Sale of goods and services act?

    Anyone? What is bought at point of sale is binding.

  24. Wanda Lust

    Ofcom or ofdev

    Maybe they should rule that the telco's provide network time & Joe Punter gets a lease agreement with a bank for the device of his choice.

    That'd put some good, solid business back to the banks.

    Wouldn't it?

  25. Ian Johnston Silver badge
    FAIL

    Fixed costs?

    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.

    How the hell is inflation between now and 2015 going to affect the cost of the iThingy bought this week? Do Apple contact the mobile operator to say "Remember that phone you bought from us wholesale eighteen months ago? Well, those damn Chinese slaves happy smiling workers are costing more to feed, so we need another hundred quid from you. Kthxbai."

  26. briesmith

    Contracts are the Cause of all our Problems

    There really is no reason for utility contracts - not in comms, water, gas, electricity or media - as every supplier these days is fully web administered where all the account set-up work is done by the consumer filling-in webforms.

    The phone companies justify it by saying that they've supplied an expensive phone which they can only recover the cost of over many months.

    I would like all such contracts to be unbundled with a separate credit agreement signed for the phone (as should happen anyway).

    Then consumers could simply walk away (to another supplier who, of course, has the same regard for their customers that the one they've just left has but that's another story).

    If the utitlity, media and phone companies thought their customers could walk away at any given moment they would have to change their ways. And there are no commercial arguments as to why that shouldn't be standard practice.

    Any smoke screen put up about set-up costs etc could be demolished very quickly on the basis that the companies woud be asked to provide the figures. This they couldn't do.

  27. James 100

    Bungling bundling

    The bundling has always irritated me for various reasons; I'd much rather pay £240 for the handset plus £10 a month over the year than £30/month for a year for a "free" handset. I think things have improved lately with far more "SIM only" offerings from most operators and more SIM-free handsets, but still not good.

    At least one EU country bans SIM-locking, as I recall, another bans handset subsidies; I can't see any reason why we shouldn't do the same.

    As for price changes: fixed term contract should mean fixed. If I'm committing to paying £10/month for two years, they should be committing to the same. If I don't get to phone them up and "notify" them that the payment is going *down* 10%, why should they be entitled to put it up that way? An indefinite contract, where either side can switch to another tariff freely, is fine: but if I lock in, so do they.

  28. b166er

    Brand new customers only!

    I'm almost completely contract free now. Come April I will be! No more thieving bastardry for me.

  29. Barrie Shepherd

    Time for change

    "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. "

    "free/subsidised" handsets should be banned. The concept was designed 20 years ago to get people onto the new networks. As virtually everyone now has a handset there should be no need for linking into the service provision cost.

    Networks should be forced to disconnect the costs of handset purchase from service provision - the current linking creates an unfair cross-subsidy for those on SIM only deals. If people really must have the newest iThingy then let them go get finance in the open market to buy it. There would also be the benefit of less old iThing's sitting in draws and maybe the iThingy manufacturers will think about getting their costs down to consumer acceptable levels as opposed to the inflated levels they can convince a network to pay - a Network that knows it can squeeze money without effort from the final customer.

    While I'm ranting can the Register start a Save Our SIM (how does one start this on Facebook?) campaign to stop the American iThingy manufactures locking our phone to them and chosen Networks with wired in SIMs - I want to roam Europe and the world swapping my SIM as the plane lands - not having to negotiate with a walled garden about which carrier they will let me use.

  30. Anonymous Coward
    Anonymous Coward

    "whim", "whatever the operator decides"

    There's a very important point you're all missing here. The only price rises that are currently allowed are those that are tied closely to appropriate independent metrics for inflation.

    They **DON'T** get to lock you in and then charge whatever they want.

    The current inflation rate in the UK is 2.7%. It's hardly going to break the bank on a £30pcm mobile tariff! Shut your whining.

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