UPDATED: Tesco Mobile promises fixed contract prices will not rise

Alex Walls
March 7, 2013

Tesco Mobile has said it would not raise fixed contract prices for customers.

Called its ‘tariff promise’, Tesco Mobile said it would never raise its customers’ tariff prices mid-contract and estimated such increases cost customers   £217 million a year.

The move follows an  Ofcom consultation on price rises during fixed contracts, launched after a number of telco operators announced pricing changes to contracts over the past 12 months.

Everything Everywhere  said this week that some customers on Orange and T-Mobile monthly contracts would see a rise of 3.3% in the price of their contracts, due to increasing business costs.  The operator also launched a ‘Fix Your Monthly Plan’ option, allowing customers to fix the price of their monthly contract for a small fee per month.  The operator had not replied at time of writing as to whether it planned a similar announcement to Tesco Mobile.

In February, O2  said  it had increased monthly line rental for pay monthly contracts by 3.2% due to inflation, affecting about seven million customers.  It did not have any plans to make a statement similar to Tesco Mobile, a spokesperson said, and this had been the first time O2 had made such a price rise.  Customers would ultimately decide which provider and tariff was best for them, the spokesperson said, and O2’s provided value extended beyond the headline price of monthly contracts.

Vodafone announced last year it would increase bills for some  monthly contracts by up to 2.4% in November last year, the Guardian reported.  A spokesman said the operator was consulting with Ofcom regarding price changes during fixed contracts, specifically as to how to manage third party price rises, such as if a premium number increased its prices and whether an operator could pass on this cost.  Vodafone could not change monthly fee prices for another 12 months at any rate, due to the increases late last year, the spokesperson said.

Three Mobile also increased their contract prices in July of last year for pay monthly customers by 3.6%, the Guardian reported.  A spokesperson said this was the operator’s first price increase for voice customers in nine years of operation, since price increases were never welcome. It was in line with inflation and saw, for example, a £15 a month contract rise by 54p.  Three was hopeful Ofcom’s review would bring greater clarity to consumers, the spokesperson said.

Ofcom decision due in June

Ofcom confirmed that a number of telco operators had announced pricing changes to contracts over the past year and this had resulted in a number of complaints.

The current rules allow for operators to change prices except where it would cause material detriment to the consumer, and operators interpreted this definition differently, an Ofcom spokesperson told What Mobile on Monday.

Ofcom said it was consulting on how to better protect consumers from price rises during fixed contracts, and its proposed approach was to allow consumers to exit their mobile, landline or broadband contract without penalty, if their provider introduced any price increase during the term of the contract.

“Alongside this, Ofcom would expect providers to be clear and upfront about the potential for price increases and of the consumer’s right to cancel the contract in the event of any price increase.”

The consultation closed on March 14th, with a decision expected in June on how best to give consumers a fairer deal in relation to mid-contract price rises.

Don’t pass on the cost’s Ernest Doku said this was welcome news for consumers who felt misled after signing up to a fixed-term contract, then discovering that prices weren’t fixed.

It was good to see networks taking the initiative ahead of Ofcom’s consultation, he said.

However while clarity and transparency were vital, it was important that customers did not pay for them through higher handset costs, or more expensive contracts, he said.

“Tesco Mobile has to maintain the value it currently offers and not pass on any potential price increases to customers at the start of the contract. Customers also have to be protected from facing a hefty increase in their monthly bill if they want to stick with their plan when their contract ends.”

However it was a step in the right direction for better consumer protection, he said, and hoped other mobile providers followed suit.

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