In a bid to ensure healthy competition, telecoms regulator Ofcom has recommended the government to ban landline phone 'rollover' contracts which automatically renew.
Ofcom has said that rollover contracts, which are being used by 3.5 million UK customers, unduly tie-in customers, refrain them from exploring other options and also hurt competition.
The practice is used by several telecoms firms, including BT, to automatically renew consumers' landline contracts when they end. If the consumers fail to inform the company that they want to cancel the contract, it is then treated like a whole new contract.
Should they then want to cancel their automatically renewed contracts, the consumers are forced to pay the standard contract cancellation fee.
Robert Hammond, of Consumer Focus, said in a statement to BBC News, “This move to make sure that consumers actively opt-in to renewing a contract is very welcome. Rollover contracts are unfair and confusing for customers. They have also hindered competition by making it harder for people to shop around and switch to a better deal.”
The move has not gone down well with BT, which said that it was disappointed with Ofcom's decision to scrap rollover contracts. A company spokesperson said that BT allowed its customers a 30 day period in which they can prevent the renewal of the contract. BT also claimed that the renewed contracts were cheaper and had no effects on competition.