Ofcom, the independent regulator and competition authority for the UK communications industries, estimates that around 15% of residential customers are currently committed to Automatic Rollover Contracts (ARC). These contracts roll forward to a new minimum contract period unless the customer actively opts out of the renewal.
This is great news for consumers as it will reduce instances of switching providers and being penalised by early cancellation and administration charges and being free to free to choose the solution that is right for them. The rules additionally apply to small businesses with fewer than ten employees.
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.”
BT is the largest communications provider currently offering these contracts. Other residential providers include Adept Telecom, Axis Telecom, Eze Talk and iTalk, while TalkTalk Business, Titan Telecoms and Optimum Calls offer ARCs to businesses.
The sale of new automatically renewable contracts to residential and small business customers will be prohibited from 31 December 2011. Providers will also be required to move all residential and small business customers currently on rollover contracts to alternative deals and completely remove ARCs from the market by 31 December 2012.