The communications regulator said the move will be better for the market because people won't be tied into ongoing contracts
Broadband and landline phone contracts that are automatically renewed, tying people into an ongoing commitment have been banned by Ofcom.
The communications regulator said that from 31 December this year, providers will no longer be able sell Automatically Renewable Contracts (ARCs), giving them time to offer customers alternative deals.
Ofcom has estimated that around 15 per cent of people are on these contracts, with BT being the largest communications provider currently offering these contracts.
Ed Richards, Ofcom chief executive, 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."
The news has also been welcomed by consumer rights organisations because it is seen as giving people more choice.
Bob Warner, chairman of the Communications Consumer Panel, 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."
BT, however, said it was disappointed by the ban, saying that it gave customers 30 days' notice before renewal. It said most of its "customers tell us they are happy with the discounts offered by these contracts and we don't believe there is any evidence that they damage competition".
The company said that as of today it would stop selling these contracts but a spokesman said he didn't think that many people will see any difference.
"The people on these contracts like the deals that they get but now they have ended they won't see much difference. We aim to keep these customers on the same deals they already enjoy as far as possible."
The communications provider did warn people whose contracts are due to roll over and renew before 31 December that they will have to ensure they cancel them. This is because these contracts will run over until next year if they are automatically renewed before this date.
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