Vodafone respond to Ofcom price freeze proposals

Earlier today Ofcom outlined proposals to prevent service providers from increasing prices in the middle of a fixed term contract without allowing the customer to terminate. Ofcom’s proposals will affect mobile, broadband and landline network providers and Vodafone has responded to Ofcom’s outlined proposals.

Ofcom’s proposal would allow a customer to exit their contract without charge if the provider increased their prices.

In the past 24 months, we’ve seen all the major network providers (Vodafone, Orange, T-Mobile, Three and O2) announce price upgrades and Ofcom’s proposals would radically affect the way the industry operates.

Vodafone has responded by saying that Ofcom’s proposals could force networks to introduce higher prices at the start of the contract to offset any potential service price increase. Vodafone say that they do not control some of the charges that consumers face, such as ringing 08 numbers or directory enquiries.

“We support Ofcom’s desire to give consumers reassurance about the prices that they will pay during their contract, but the regulator’s proposals risk generating significant confusion and potentially increasing the cost of getting a mobile phone contract for millions of people,” the company said in an authorised statement. “As such they could damage what Ofcom’s own research shows is the best-value mobile phone market for consumers anywhere in Europe.

“We believe there is work to be done to ensure that customers understand the need for long-term contracts and to ensure they are protected during that time, but Ofcom first needs to understand the difference between the prices that are set by mobile phone companies and those which are not.

“We simply do not control many of the charges faced by consumers. They are set by third parties and mobile phone companies have to pass those costs on or they will be subsidising other companies. Prices set by third parties such as BT, include those for directory inquiry services, premium rate and 08 numbers. Yet Ofcom appears resolved to introduce measures that would effectively prevent any rises in these prices being recouped while customers are still in contract.

“We cannot be held accountable should BT, for example, put up the price of calls to premium rate, 08 or its 118500 numbers. Nor can we be expected to swallow that sort of price rise ourselves.”

“Under Ofcom’s proposals new customers could find themselves paying different prices for different services depending on which third party has recently increased its prices. At a time when both the regulator and consumer groups are calling for prices to be simpler to understand, Ofcom’s proposals could take the industry back to a time when consumers were faced with a bewildering array of prices for calling different numbers.

“Ofcom itself admits that if its proposals are carried out, they could result in the up-front cost of using a mobile phone actually increasing as mobile phone operators will have to try and second guess what price increases third parties will attempt to introduce.”

“As this is the start of a consultation on the issue we will of course be engaging with Ofcom to see how they intend to prevent price gouging by third parties, widespread consumer confusion about prices and increases in the up-front cost of getting a phone.”

It’s worth noting that price increases for out-of-bundle charges (such as the ones mentioned) are not the main cause of customer anger. In the past 24 months, all networks have include fine print in their Terms & Conditions that allow them to increase prices by up to 10% without customers being able to terminate their contract. This has been the main cause of Ofcom’s proposals as many customers have begun to complain about these price increases.

A potential solution to the issue would be for Ofcom to outlaw price increases for in-contract charges – this would apply to monthly line rental increases as well as charges for going over your allowance. As these charges are usually not third-party related, it’s fair to ban networks from increasing their prices, even to offset inflation. For prices out of bundle (such as premium rate numbers, directory enquiries and 08 numbers etc), networks should be allowed to pass on price rises to customers.