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Ofcom faces calls for a “complete ban” on “absurd” mid-contract price rises Government Separately asked the regulator to reconsider its rules on the practice.
Following the call O2 unexpectedly announced it was increasing prices for existing customers by £2.50 a month.
Technology Secretary on Monday… Liz Kendall Ofcom wrote an open letter to bosses asking for a re-review of mid-contract price rises.
He wrote: “As we discussed when we met earlier this month, reducing the costs of inflation and protecting consumers is of vital importance to this government.
“As such, I welcome both the action you took in January to increase transparency on how in-contract prices are presented in new contracts, and your statement yesterday expressing disappointment at O2’s price rise.
“I strongly agree that they go against the spirit of your previous changes on pricing, and it is even more disappointing given the current pressure on consumers.”
He added: “Nonetheless, I believe we need to move more quickly. I am anxious to see us see in-contract prices rise again.”
Ofcom has been given until November 7 to respond to Ms Kendall’s letter.
Ofcom said: “We share the government’s concern that customers facing price rises should be treated fairly by mobile providers and have the right to exercise their right to switch penalty-free if they have not already agreed.
“We will respond to the Secretary of State’s specific questions shortly.”
O2 said in a statement: “We appreciate that a price change is never welcome, but we have been fully transparent with our customers about this change, writing to them directly and providing the right to opt out without penalty if they wish.”
Ofcom introduced new rules in January to crack down on phone and broadband providers who raise prices mid-contract without warning.
But last week, O2 announced it would be increasing its monthly prices more than originally promised.
It was able to do this because the increase was not linked to inflation, and it gave customers 30 days to leave without penalty, provided they continued to pay the cost of their device.
O2 said it did not go against regulation and that Ofcom rules do not prevent providers from raising prices.
The firm said: “A price increase equivalent to 8p per day far outweighs the £700 million we invest each year in our mobile networks, with UK consumers benefiting from an extremely competitive market and the lowest prices compared to international peers.”
Alex Tofts, broadband spokesperson for comparison site Broadband Genie, said: “What we are seeing from O2 and the price rises from other major providers is a direct result of crude regulation that has been poorly thought out, with not enough consideration of its implications.
“The only real way to protect customers is to ban these absurd mid-contract price increases altogether. Some providers already offer fixed prices, so why can’t those with the biggest profit margins do the same?
“We fully support Ofcom’s call to revisit these rules. Until then, we urge all consumers to check whether they are still in contract.
“To be fair to Ofcom, the broadband switching process has become much easier thanks to the One Touch Switch system. With one in three households currently free to switch, and many providers offering competitive new-customer discounts, now could be the best opportunity to protect your budget before further price rises come into effect.”