As the mobile-phone giant increases the cost of existing deals, Which? is shocked and Ofcom is poised to step in
Vodafone provoked a storm of criticism after announcing it is again increasing bills for millions of customers on “fixed” contracts, this time by up to £1.55 a month.
The increase, which takes effect on 1 November, was branded “shocking” by consumer organisation Which?, while unhappy customers flocked to internet forums to attack the decision. Many said they would be quitting the company, and at least one Facebook campaign has been set up.
But could Vodafone, and other mobile phone firms that have upped the cost of existing contracts, be about to find themselves in hot water? Telecoms regulator Ofcom has, for some months, been investigating mid-contract price hikes, and whether they are fair, after complaints from consumers. It emerged this week that an announcement from Ofcom about what action it may take is “fairly imminent” and will probably come this month.
Campaigners are hoping the regulator will intervene and stamp out “hidden” price increases on “fixed” mobile contracts, or make sure that customers have the ability to cancel without penalty if their provider changes the terms of their deal.
Vodafone has form in this area. In September 2011 Guardian Money reported how the company, with nearly 10 million UK customers on monthly contracts, was “simplifying” people’s bills by rounding them up to the nearest 50p. So someone paying £35.74 a month saw their bill rise to £36 on 11 October that year.
One year on, Vodafone seems to have decided that its need for cash overrides the need for simplicity. It is increasing monthly bills by up to 2.4%. The average price rise per month is 59p, while the minimum increase is 15p a month and the maximum £1.55 a month. So that £36 a month will typically become £36.80.
A quick calculation suggests this could put an extra £67m a year into Vodafone’s coffers, assuming around 9.5 million people pay 59p a month extra. In May, the company reported profits of £9.5bn for the year, prompting renewed protests from critics who argue that it has underpaid tax in the UK.
The price rise for fixed contracts is not the only change. Vodafone is also increasing the cost of premium rate calls on 1 November. These numbers, which start with 09, will now cost a minimum of 60p – up from 51p. Meanwhile, “voice short codes” – numbers that allow viewers of shows such as ITV’s X Factor to take part in votes – used to be charged per second, but will now have a minimum one-minute call charge. And calls to directory inquiries 118500 and 118404 will go up from £2.75 to £3 a minute.
The company’s small print says people can only walk away from their agreements in certain limited situations – for example, if someone can show the changes being made will increase their total charges by more than 10%, based on their recent usage. But this could be challenged in the future.
Many Vodafone customers were quick to slam the company’s latest move. On one of its own web forums, a customer calling him/herself “chetan86″ said he had just taken out a Vodafone iPhone 5 contract, and next day received a text saying his monthly line rental would be increasing.
“Seriously? I’ve just entered a contract to pay a fixed fee for 24 months and then, 24 hours later, you’re telling me it’s going to increase? Surely once I’m in a contract, that is the price I pay for 24 months – there shouldn’t be any changes unless VAT changes,” they wrote. Another said: “If we sit back and do nothing, they will get away with it – we need to make some serious noise or they won’t listen. The thing that upsets me most is I finally thought I’d found a good contract and was happy, but this is just unacceptable!”
A third wrote: “My bill will increase by 70p per month; not a lot, but as a point of principle I will leave Vodafone when my current contract expires. I’ve been a customer for 14 years … Hopefully Ofcom will put an end to this practice in due course. In the meantime, vote with your contract!”
Vodafone blamed the increase in monthly bills on rising costs and said it had made every effort to minimise the impact. It added: “We’ve set the line rental changes in line with inflation as measured by the Retail Price Index, at a time when we are seeing rising costs within our own business. We know we continue to offer great value for customers …”
Which? has already submitted a formal complaint to Ofcom about companies raising their prices mid-term, after people had signed up to what they thought was a fixed price for a specified period. Other companies that have upped prices this year include Orange, T-Mobile and Three.
The consumer organisation launched a “Fixed Means Fixed” campaign calling for an end to price increases on “fixed” contracts, and to date has received more than 29,000 pledges of support from consumers.
So what can angry customers do?
• Wait to see what Ofcom announces. The regulator launched a review in January this year, and said that while current rules allow for contracts to include price increases “in certain circumstances,” its investigation had identified “a number of potential issues with the current regime and the adequacy of the current level of customer protection”. A spokeswoman said: “We are reviewing all the evidence we have gathered on this issue and expect to announce next steps in the autumn.” There are no clues yet as to what Ofcom might do.
• Support the Which? campaign. Go to which.co.uk/fixed.
• Complain to your local trading standards department. Some customers may take the view that the small print supposedly allowing the company to increase its charges falls foul of the Unfair Terms in Consumer Contracts Regulations. These state that one example of a term that may be regarded as “unfair” would be one that “enables the seller or supplier to alter the terms of the contract unilaterally without a valid reason which is specified in the contract”. If trading standards receive enough complaints, they may investigate.
• Sign up with a phone company that has not increased the cost of its pay monthly contracts. O2 told Money this week that it had not increased prices midway through contracts, and had no plans to do so.
Vodafone says that if you believe the combined changes coming in next month may increase your monthly costs by more than 10%, it is possible you may be able to end your agreement.
Write to Vodafone Customer Services, Vodafone House, The Connection, Newbury, Berkshire RG14 2FN by 1 November. A company spokesman says: “We’ll analyse your previous three months’ usage and contact you to discuss your options.”
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