Ofcom has banned rollover contracts, which currently tie landline and broadband customers into repeated minimum contract periods unless they opt out. The ban comes into effect from December this year for landline and broadband customers.
Bob Warner, Communications Consumer Panel Chair said: "This is really good news for consumers. It will prevent residential and small business customers getting stuck with fixed landline and broadband contracts that no longer meet their needs because contracts have been extended for another year without their active consent."
The contracts, known as Automatically Renewable Contracts (ARCs), are difficult to leave if you're not aware of the specific way to do so. Currently, ARCs roll on to a new minimum contract period – with penalties for leaving – unless the customer actively opts out of the renewal.
Ofcom estimates that approximately 15 per cent of UK residential consumers are on rollover contracts. BT, Adept Telecom, Axis Telecom, Eze Talk and iTalk all offer these contracts to individuals, while TalkTalk Business, Titan Telecoms, and Optimum Calls supply ARCs to business customers.
Ofcom Chief Executive, Ed Richards, said in a statement: “Ofcom’s evidence shows that ARCs raise barriers to effective competition by locking customers into long term deals with little additional benefit. Our concern about the effect of ARCs and other ‘lock in’ mechanisms led to our decision to ban them in the communications sector.”
Providers will have to move all customers currently on rollover contracts to alternative deals by 31 December 2012.