Consumers and small businesses will be allowed to cancel their mobile, broadband and landline contracts if they are subjected to price increases on a fixed-term contract, under new guidance set out by communications regulator Ofcom.
Ofcom said that consumers are being faced with inconsistency across different telecommunications firms on whether they have a right to cancel a fixed-term contract if there are price increases, and said that its decision followed a consultation on how to give consumers a fairer deal.
"We think the sector rules were operating unfairly in the provider's favour, with consumers having little choice but to accept price increases or pay to exit their contract," said Ofcom's consumer group director, Claudio Pollack.
The new guidance will come into effect in three months, and will apply to any new landline, broadband and mobile contracts, and some bundled contracts, entered after this date. Consumers and businesses that have fewer than 10 employees will be able to benefit from the new rules.
Ofcom said it is likely to regard any increase to a monthly subscription charge in a fixed-term contract as "materially detrimental" to consumers. It added that any changes to contract terms must be communicated "clearly and transparently" to consumers with letters or emails sent to the consumer with clear marks on the front of the envelope or in the subject header. The customer's rights to exit their contract - and relevant information on their time to do so - should also be clearly written on the front page of the letter or in the main body of an email message, as opposed to being provided in a link.
Providers will also be asked to give consumers at least 30 days' notice of any price rises, to enable them to exit their contract without any penalties.
"We're making it clear that any increase to the monthly subscription price should trigger a consumer's right to leave their contract - without penalty," Pollack explained.
The regulator explained that if a telecoms firm tried to get around the guidance by reducing the call, text or data allowance included in a customer's monthly subscription price, it would regard this as a price increase, as consumers would be getting less for the same money.
Exceptions to the new plan include passing on increases in VAT or any other taxation charge or regulatory levy that has been put forward by government or regulatory authorities. Any services and usage outside of a customer's allowance are not included.
Ofcom said it would also monitor complaints about any increases to non-subscription charges, but that at this time, the guidance does not apply to these prices.