O2 updates contract terms to sidestep Ofcom ruling

UK operator O2 has altered the terms and conditions of its subscriber contracts to sidestep rules introduced by regulator Ofcom last week. The regulator had announced that UK consumers and small businesses would be allowed to leave their mobile operator without paying a penalty fee if their service provider increased its prices mid-contract.

Ofcom’s new rules state that UK customers entering new contracts will have to be notified of any price increase to what was agreed at the point of sale at least one month in advance. When informed of the price hikes, customers will be allowed to exit their contract without paying cancellation charges. Failure by service providers to comply could result in a fine of up to ten per cent of its annual turnover, Ofcom added.

However, O2 has responded by announcing that customers on its network prior to the January 23^rd rule change will see a 2.7 per cent increase in their March 2014 bill in line with the UK retail price index, which it announced in January. This is in line with those customers’ current terms and conditions where it states that O2 “may increase or decrease our prices from time to time”.

However, customers who join O2 or upgrade their contracts from January 23^rd, when Ofcom’s rule change was implemented, will be subject to new terms and conditions. The new terms explain that “monthly subscription charges/airtime plan will be subject to an increase during March 2014 and from 2015, and each year thereafter, during April, they will be subject to further increase or a decrease by the RPI rate”. By stating in the terms and conditions that it “will” rather than “may” increase prices and specifying the month in which it will be implemented, O2 has managed to avoid allowing subscribers to leave contracts without paying an exit fee in response to price hikes.

“Price increases are never welcome but inflation has an impact on our costs,” the Telefonica subsidiary said in a statement. “For most of our customers it will mean an additional charge of less than 60p on their monthly subscription. We continue to invest in our network and the services that matter to our customers while still offering great value for money.”

Ofcom admitted that O2 is compliant with its guidance by implementing such changes to its contracts, but warned that it has to be abundantly clear and transparent to consumers at the point of purchase.

“It can’t be that they bury this away in their terms and contracts,” an Ofcom spokesperson told Telecoms.com. “We are assessing what is provided to customers at the point of sale with a fine tooth comb to ensure that it is being communicated completely transparently, so that consumers can be said to have fully agreed to it at the point of sale. We are going to be doing mystery shopping top ensure this too. Transparency is the key thing; they have to be abundantly clear, transparent and up front at the point of sale so consumers can make an informed choice.”

Following O2’s decision, rival 3UK has moved to ensure users that it supports Ofcom’s ruling and said that the legislation is in consumers’ best interests. It added that it will fully comply with the regulator’s rules.

“Your fixed monthly recurring fee from Three will not go up in the minimum term of your contract,” the operator said in a statement. “We support Ofcom’s approach to fixing the price for pay monthly contracts for their duration. We think it’s only fair that customers should have clarity around costs when they sign up to a contract.”