On 19 July 2024, the Office of Communications ("OFCOM") announced new consumer protection rules requiring telecoms customers to be told upfront in pounds and pence about any price rises included in their contracts, following proposals consulted on earlier this year as commented on in our previous blog. This blog explores these new OFCOM rules and what they will mean for providers.
The New Rules
From 17 January 2025, any price rise included in a customer's contract with a communications services provider must be set out in pounds and pence. The new rules prohibit phone, broadband and pay TV providers from including inflation-linked, or percentage-based, price rise terms in all new contracts from this date. The changes are applicable to all broadband, landline, mobile and pay TV services, including where they are taken in combination as a bundle.
In its statement introducing the new rules (the "Statement"), OFCOM said it was concerned that the inclusion of price rises linked to future inflation, which is hard to predict, "makes it difficult for customers to know what they will pay over the course of their contract".
The new rules require providers to set out the "Core Subscription Price" and the "Core Subscription Price Change Information" within the contract information setting out the price in pounds and pence and the date from which any change shall have effect.
These new requirements should be applied for both written and verbal agreements and providers will need to include both the original and new information in the contract summary.
What does this mean for providers?
The new rules set out that if customers are not informed of the differing payment amounts and the provider increases their prices or increases the prices above what has been agreed, the customer should have the right to exit the contract without facing penalties.
However, this is not a requirement to give customers the right to termination upon any price rise. As long as such price rises are clearly set out and agreed to by the customer in signing up to the contract, then the customer does not need to have the right to terminate.
It is also not a ban on early termination charges and the customer can still face additional charges if they leave the contract when providers increase their prices in accordance with the guidance and their terms.
What should providers do next?
Providers should ensure that they are amending their terms and conditions in consideration of the new rules and the guidance under general condition C1 – contract requirements to come into effect January 2025 (the "Guidance") so that all references to inflation linked rises are removed. They will also need to decide on what pounds and pence increases will apply to their consumer contracts and consider the potential commercial consequences of fixed increases that are not tied to inflation and an independent index.
Providers should also ensure that they inform staff of the new regulations. The Guidance states that in assessing compliance, OFCOM expects providers to take reasonable steps to inform staff including ensuring sales staff are briefed and ensure sales scripts and contract negotiations include the necessary information.
Non-compliance can lead to enforcement action and potentially financial penalties. As mentioned in our previous blog, BT was fined £2.8 million after failing to comply with consumer protection measures laid down by OFCOM for communications providers in the UK. Failure to comply with these new rules could result in costly fines for communications providers caught under such new rules.
Regular compliance reviews of customer terms and conditions and customer contracting processes are essential to ensure that they comply with OFCOM rules. If you would like to discuss any of the points raised in this blog in more detail or a review your customer contracts and contracting processes, please get in touch with Martin Sloan or your usual Brodies contact.
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