Service providers question Ofcom's new termination plans

Service providers have questioned a new ruling by Ofcom, which will cut the cost of terminating a phone and broadband package early by 85 percent.

And Talk Talk has called it “disappointing”.

The watchdog  has been discussing these proposals with providers including BT, TalkTalk and Virgin Media over the past 18 months. It wants early termination charges to reflect the savings the companies are making by no longer having to provide the service to users. It says the charges should never total more than the payments left under the contract.

The providers initially believed the charges were fair. However, following the discussions, they have agreed to significantly reduce the early termination charges for landline and landline plus broadband services.

A representative for Ofcom said: “Consumers who end contracts early should never have to pay more than the payments left under the contract. In fact they should often pay less, to reflect the costs providers save because the contract ends early.”

However it said it was “pleased” the providers had taken “positive steps in the interests of consumers”. It also expects other landline providers to follow suit. If they don’t, the watchdog said they may face legal action.

However some service providers aren’t happy with the new rulings. In a statement sent to us by Talk Talk the company said: “We are disappointed that Ofcom is not requiring BT to reduce any broadband Early Termination Charges meaning that millions of BT customers will still be required to pay high penalties if they wish to move to a better value deal while in contract.
“The TalkTalk Early Termination Charge policy is the most simple and customer-friendly in the industry with a limited number of charge-points that are easy to understand and are set at a fair and reasonable level. We’ve always been clear about Early Termination Charges to ensure that customers are fully aware of any charges they may incur.  
“Ofcom’s Early Termination Charge methodology will create greater confusion as it means customers can pay vastly different Early Termination Charge amounts depending on retail pricing and underlying network technology – an area in which customers have understandably little knowledge or interest.”

However BT hit back against Talk Talk and Ofcom. A representative for the company said: “BT’s early termination charges are not unfair. If a customer leaves within the minimum contract period that they signed up to, they are charged the amount we expected to receive from them, less the costs we save as a result of them leaving early, as this is what we are legally entitled to.”

It said after discussions with Ofcom, it had to reduce these charges for landline (or landline plus broadband) services over the coming months, to help it reach an industry-wide agreement on charges.

Virgin however, sat on the fence. A Virgin Media spokesperson said: “As a customer-focused organisation, we have worked with Ofcom to reduce our contract termination costs to the lowest possible levels. 

“In practice, the cost for leaving Virgin Media within a contract period will often be less expensive than our competitors due to our shorter 12 month contract terms for bundled telephone and broadband services, where others now commonly impose 18 month contracts.  We will continue to look at ways in which we can provide the best value services to consumers.”