Ofcom to ban rollover broadband, landline contracts

Communications services providers will no longer be able to shackle broadband and landline customers to restrictive rollover contracts from December this year, Ofcom has confirmed.

The contracts, also known as Automatically Renewable Contracts (ARCs), roll forward to a new minimum contract period - with penalties for leaving early - unless the customer actively opts out of the renewal.

Ofcom has decided to ban ARCs for landline and broadband services to residential and small business customers from December. The move is part of Ofcom's drive to remove the barriers preventing consumers from switching communications provider to secure a more favourable deal.

The regulator estimates that 15% of UK residential customers are currently on ARCs, with BT the biggest provider of the contracts.

Ofcom chief executive Ed Richards said: "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."

Ofcom has outlined a timetable for the removal of all rollover contracts, taking into account the "systems changes" that will be required by communications providers.

Providers will have to move all residential and small business customers on rollover contracts to alternative deals by December 31, and also completely remove ARCs from their operations.

The Communications Consumer Panel, an independent body set up by Ofcom, welcomed the move to ban rollover broadband and landline contracts.

Bob Warner, chair of the panel, said: "This is really good news for consumers. It will prevent residential and small business customers getting stuck with fixed landline and broadband contracts that no longer meet their needs because contracts have been extended for another year without their active consent."

Ofcom has recently been on the offensive against poor standards in the communications industry, including a request in May for any customers who have received "unexpectedly high" mobile, landline or broadband bills in the past 12 months to flag them up to the regulator.

Last month, Ofcom also fined TalkTalk and Tiscali UK £3 million for wrongly billing tens of thousands of customers for services they had actually cancelled.