Warning on £90m mobile contracts
Mobile phone companies could be making up to £90 million a year by legally using "hidden" contract clauses to raise the cost of what should be fixed-rate tariffs, the consumer group Which? has warned.
The organisation has filed an official complaint to regulator Ofcom after an investigation found that 70% of people on fixed contracts did not know that network providers could increase prices during the lifetime of their contract.
It has launched a campaign, Fixed Means Fixed, calling for an end to price increases on mobile phone contracts, arguing they should stay the same price from start to finish of the contract.
Richard Lloyd, the executive director of Which?, said: "These hidden price rises mean millions of people are forced to pay more than they expected at a time when household budgets are already squeezed.
"They are then trapped in a contract, unable to switch to a cheaper provider without paying a hefty penalty. Ofcom must intervene now and stamp this out. Consumers must be confident that fixed really does mean fixed."
Which? said companies including Three, Vodafone, T-Mobile and Orange were all raising prices, saying Three is increasing its fixed-tariff prices by 3.6%, a move Which? said would affect more than one million customers.
It said it had been contacted by more than 1,700 people regarding price rises and called for price and all other aspects of fixed deals to remain the same for the contract period when consumers are also tied-in. If there is a chance that prices may rise, operators must be more upfront about this in their advertising and allow people to switch providers without penalty, it said.
On its website, Three said it was increasing the cost of phone and mobile broadband contracts set up before March 8 2012 by 3.6%, in line with the Retail Price Index (RPI) measure of inflation. "Our terms and conditions allow us to raise prices in line with inflation so that we can cover our business costs," it said.
"This means that you won't be able to leave your contract early as a result of this change. While we know a price increase is never welcome, this is the first time that we've ever raised the price of our pay monthly phone contracts and we're confident that your plan still represents excellent value for money."
Ofcom said it had been investigating the practice across all networks since January after receiving complaints and said it would look at the information Which? had submitted.