Ofcom to ban rollover contracts for broadband and landline services

Ofcom is to ban communication providers from offering contracts for broadband and landline services that are automatically renewed unless customers actively opt out.

The ban, which will come into force in December, means that consumers, home workers and businesses with fewer than 10 employees on Automatically Renewable Contracts (ARCs) will not incur fees if they leave a provider without opting out of the contract renewal.

The move could affect millions of consumers and small businesses, as BT, TalkTalk Business, Titan Telecoms and Optimum Calls all use these contracts.

BT said that it was "disappointed" with Ofcom's decision, claiming that most customers like ARCs, but that it will stop the sale of such contracts immediately.

"Customers tell us they are happy with the discounts offered by these contracts and we don't believe there is any evidence that they damage competition, given that the UK telecoms market is among the most competitive in the world," BT said.

"We have worked hard to make sure that customers understand what they are signing up to, including how the renewal works and the charges that apply if they choose to leave early."

Nevertheless, Ofcom said that the ruling will end a practice that has long been of concern and will benefit the vast majority of customers.

"Since they first became a prevalent feature of the residential fixed voice sector in 2008, we have been concerned that ARCs are damaging to consumers and competition in communications markets," the regulator said.

"We recognise that ARCs may have benefits, for example those who wish to remain with their communication provider. However, we believe these benefits are relatively limited and are outweighed by the costs."

Ofcom also noted that the majority of respondents to a consultation published in March welcomed the proposals, including consumer groups and most communication providers, and that only two companies had opposed the suggestions.

The ruling means that providers will be banned from offering ARCs from 31 December 2011, and all customers currently on such contracts must be moved to alternative deals by 31 December 2012.