Ofcom bans rollover contracts

Ofcom has confirmed that rollover contracts, which tie landline and broadband customers into repeated minimum contract periods unless they opt out, will be banned from December.

The contracts, also known as Automatically Renewable Contracts (ARCs), roll forward to a new minimum contract period – with penalties for leaving – unless the customer actively opts out of the renewal. The ban will apply to ARCs for landline and broadband services sold to residential and small business customers.

BT is the largest communications provider currently offering these contracts and Ofcom estimates that approximately 15% of UK residential consumers are on rollover contracts.  Other residential providers include Adept Telecom, Axis Telecom, Eze Talk and iTalk, while TalkTalk Business, Titan Telecoms, and Optimum Calls offer ARCs to business users.

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.”

Click here to read Ofcom’s statement on ARCs.