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Customers could save as much as 85 per cent on the charges
Telecoms companies have agreed to slash the amount they charge consumers to end a landline phone plus broadband contract early.
The agreement also applies if the consumer only wishes to cancel a landline service, and could mean savings as high as 85 per cent for some customers.
The move came after Ofcom investigated telecoms providers to see if they were abiding by the Unfair Terms in Consumer Contract Regulations 1999. The regulator said in its view, consumers who end contracts early should never have to pay more than the payments left under the contract.
It went as far as to say under its interpretation of this law, consumers should often pay less to reflect the costs that providers save because the contract ends early.
The three biggest UK landline and broadband providers, BT, Talktalk and Virgin Media said they not believe that their early termination charges were unfair.
However, they have worked with Ofcom over the last 18 months to ensure the costs they charge for early termination of contracts reflects the savings they make by no longer providing the service.
Mike Wilson, mobiles and broadband manager at Moneysupermarket, said Ofcom’s announcement was “great news” and a fairer way to treat customers.
“People can be taken in by a cheap deal or freebies and easily find themselves tied into long contracts.
"These 18-month deals are becoming commonplace and with the landline and broadband markets moving so quickly, people can often find they are no longer on the best deal shortly after signing up to a new one,” he said.
Because each provider has different costs to account for when a customer cancels a contract early, the charges will vary.
Talktalk introduced its new charges on 1 June 2010 (except for its Tiscali brand, where charges will change on 1 November 2010).
Virgin Media and BT will introduce the new charges in October 2010. Ofcom said if other providers fail to apply the same principles, they could face formal enforcement action.
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Broadband cancellation costs
This is all well and good for those that have taken up packages, but what about we poor souls who have separate landline and broadband arrangements who need to cancel wired broadband? I have an account with one of the Plusnet companies, which I gather is actually a subsidiary of BT. It was in use at my former main home, which I still own. However, to cancel the broadband facility- whether or not I cancel the BT landline- I am now required to pay the exorbitant cost of £25, even though I passed the minimum contract period with the Plusnet company at least two years ago. Shouldn't this be regarded as an unfair contract term? After all, British Gas didn't charge me a cancellation fee when my flat was no longer supplied with gas! These extortionate charges are outrageous and Ofcom needs to look at them too; while admittedly I did have perhaps three weeks to decide to cancel my service when this policy was first announced, it still seems very harsh when all that is required for BT to do is to block the broadband facility on the line- and which could easily be restored in future.
Posted by Mark Savage, 18 Jun 2010