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Ofcom propose rollover contracts ban
Friday 4th March 2011, by Daniel King
Ofcom could soon make it easier for broadband customers to switch to anew provider.
Contracts that feature automatic renewals - renewing contractsautomatically unless the consumer opts-out - could soon be banned as aresult of new proposals from the communication watchdog.
Customers with landlines are often tied into repeated minimum contractperiods, known as rollover contracts.
BT offers phone and broadband packages with automatic renewal, alongsideseveral smaller telecoms providers. Approximately 15 per cent of
residential customers are on this type of arrangement, according to Ofcom.
Trying to cancel phone or broadband services mid-term under a rollovercontract can lead to financial penalties. However, customers do have theoption to opt-out of a contract at renewal.
In a statement, the watchdog said it was concerned that phone andbroadband deals featuring automatic renewals made it more difficult forpeople to switch to a new provider, thus reducing the consumer benefitsof a competitive telecommunications market.
Customers facing financial penalties for opting-out of a contractmid-term could be deterred from switching to another company.
Ofcom fears the use of rollover contracts limits competition for themarket generally, making it more difficult to for rival firms to attract
new business. This leads to fewer incentives for providers to createlow-cost deals and higher quality services.
Under new proposals, opt-out contract renewals will be banned in the landline and broadband sectors as part of contract regulatons. Financial penalties of up to ten per cent of turnover could be incurred byproviders who continue to offer this type of arrangement.
Research from Cable.co.uk has revealed that internet connection speeds are the most important factor for customers choosing a new provider.
Fast broadband speeds featured as part of broadband, TV and telephone packages, could be the difference between signing up or moving on.
More than a third of people polled by the website said faster broadbandwas more important than value for money or the convenience of dealing with a single firm, its survey revealed.
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