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Ofcom bans auto-renew telco contracts

Ofcom has confirmed that rollover contracts, which tie landline and broadband customers into repeated minimum contract periods unless they opt out, will be banned from December this year.

The contracts, also known as Automatically Renewable Contracts (ARCs), roll forward to a new minimum contract period – with penalties for leaving – unless the customer actively opts out of the renewal. The ban will apply to ARCs for landline and broadband services sold to residential and small business customers.

It estimated that about 15 per cent of UK customers who sign up to a broadband and landline provider are tied to Automatically Renewable Contracts (ARCs).

Ofcom said it would require comms providers to eventually shift all residential and small business customers off rollover contracts and over to alternative deals.

“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,” said the regulator’s chief Ed Richards.

Naturally, providers that currently use ARCs disagree that these contracts are detrimental to either the customer or competition, but Ofcom’s mind is made up and BT has already said that it would no longer be selling ARCs to residential customers now that the ban has been confirmed by Ofcom.

Here a 08Direct, we think this is a good thing. That’s why we’ve never tied customers into lengthy contracts – 30 days notice is all we ever ask, even from day 1 of the service being provided.

What do you think? Are ARCs good for anybody but the provider? Or are you glad to see the back of them?

 

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