Ofcom has confirmed that service providers will no longer be able to tie customers into rolling broadband contracts.
Currently, some broadband providers choose to use Automatically Renewable Contracts (ARCs), which roll forward into another minimum contractual period upon expiry.
This means that if a consumer wants to switch broadband provider, they need to proactively opt out of the renewal or pay a financial penalty to leave.
But from December 31st 2011, providers will be prohibited from tying consumers to ARCs, meaning they will be free to choose a new vendor when their contract ends.
Ofcom estimates around 15 per cent of UK broadband customers are currently on a rolling broadband contract.
BT is the largest communications provider currently offering ARCs, along with Adept Telecom, Axis Telecom, Eze Talk and iTalk.
Ed Richards, Chief Executive of Ofcom, commented 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," he stated.
Ofcom will require communications providers to move all residential and small business customers currently on rollover contracts to alternative deals by the end of 2012.
Nick Thompson, Director of Consumer Services at broadband provider KC, welcomed the decision to ban rolling fixed-line phone and broadband contracts.
"They can prevent consumers from enjoying much faster broadband speeds from other suppliers, something we've experienced as we expand our broadband services to new areas," he stated.
"We don't deploy rolling contracts across our network and are committed to giving our customers the best possible service and fastest possible speeds. We'd encourage other service providers to follow our lead."