Consumers and small businesses will be able to exit their landline, broadband or mobile contract without penalty if the price is increased mid-contract, Ofcom has announced.
In a new guidance document, the communications regulator said broadband providers must offer cancellation rights if they choose to raise prices during a customer's contracted period.
Ofcom noted that any increase to the recurring monthly subscription charge in a fixed-term contract is 'materially detrimental' to consumers.
And therefore providers must give consumers at least 30 days' notice of any price rise, and allow them the freedom to switch to a different provider if they so choose.
The regulator added that any changes to contract terms, pricing or otherwise, must be communicated "clearly and transparently" to consumers.
Ofcom has issued the guidance following a consultation on how to give consumers a fairer deal in relation to price increases during fixed-term contracts.
The new guidance - which applies to landline, broadband, and mobile contracts, and also bundled deals - comes into force in three months' time. It will apply to any new contracts taken out after this date.
Claudio Pollack, Ofcom’s Consumer Group Director, said the regulator has determined that consumers entering into fixed-term telecoms contracts "must get a fairer deal".
"We think the sector rules were operating unfairly in the provider’s favour, with consumers having little choice but to accept price increases or pay to exit their contract," he stated.
“We’re making it clear that any increase to the monthly subscription price should trigger a consumer’s right to leave their contract - without penalty.”
Ofcom explained that the latest guidance does not apply to non-subscription prices - for instance, those relating to pay-as-you-go mobile broadband.
Any increases to these prices will remain subject to Ofcom’s General Conditions and the relevant consumer legislation.
"Ofcom will monitor complaints about any increases to non-subscription charges and may review its position if new evidence of consumer harm comes to light," the regulator stated.
Ernest Doku, telecoms expert at uSwitch.com, said: "This announcement is great news. Signing up to a contract, only to get told mid-way through that prices are going up – and by the way there's nothing you can do about it – is a proverbial kick in the teeth. Therefore we welcome this move, which will allow broadband and mobile customers to walk away from hiked up bills.
“Hopefully it will make providers think twice about increasing prices - they won’t want to lose customers two months into a 24 month contract. But even if this move doesn’t stop prices going up, at least consumers will be able to vote with their feet and say no to higher bills by moving to a new deal.
"Considering that most mobile contracts are two years long, two annual increases could tip bill payers over the edge and, until now, there's been no way out. Consumers have just had to suck it up, and pay more. To make matters worse, many are often unaware that bills could go up - a fixed term contract doesn’t mean fixed prices.
“However, while this is undoubtedly a major win for telecoms customers the big worry is that networks and providers will start raising prices to compensate. There could also be repercussions for mobile customers who got a handset with their deal - will they have to return it, or buy it outright, or we will see the end of free devices?
“Ultimately though, this is good news for consumers who are tired of having to put up with higher bills, without a way out. And with the changes set to come into effect in just three months, consumers will soon enjoy greater protection from rocketing telecoms bills. Ofcom has shown that it can act in the best interest of consumers, and we welcome the steps it has taken today.”