Home phone News

Ofcom outlaws rollover contracts on landlines

Wednesday 14 September, 2011

By Kelvin Goodson

Telecoms regulator to make it easier to switch home phone packages from 31 December 2011.

Ofcom is to ban rollover contracts, which see landline and broadband customers tied into deals that are automatically renewed unless they specifically opt out, from December this year.

BT is the largest home phone and internet provider that offers rollover contracts at present, but a number of smaller companies tie in residential and business customers with these agreements.

Ofcom estimates that 15% of UK home customers are on a rollover deal, or automatically renewable contract (ARC). These deals renew themselves, with penalties charged for breaking them, unless the customer actively opts out of them.

Ofcom chief executive, Ed Richards, said: “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.”

A BT spokesperson said that the company is “disappointed” with the ban as its customers “are happy with the discounts offered by these contracts” and it does not believe there is proof that these deals damage competition.

BT has ceased selling new residential rollover contracts with immediate effect, despite the ban not coming into force until 31 December, while existing customers on rollover contracts will be contacted about the alternatives over the next few months.

However, rolling contracts up for renewal before 31 December will rollover as usual unless the holders contact BT to cancel the contract during the 30-day notice period before renewal.

Providers will have to move their existing home and small business customers on rollover contracts to alternative deals under Ofcom’s requirements, with rollover contracts to be phased out completely by 31 December 2012.