Rollover contracts – officially known as Automatically Renewable Contracts (ARCs) – are where broadband and landline customers are automatically tied into repeat minimum contract periods unless they specifically opt out during a 30-day switching window. This has meant that customers who perhaps haven’t noticed that their contract period is about to expire are automatically rolled forward onto a new long-term deal.
The ban will apply to all landline and broadband services sold to residential and small business customers, and are designed to remove the barriers that make it difficult for customers to switch providers
Ofcom has estimated that around 15% of UK residential broadband/landline customers are currently on these rollover contracts, and it says that BT is the largest telecommunications company that offers them, though others include Adept Telecom, Axis Telecom, Eze Talk and iTalk, though there are other rollover-contract providers that target businesses.
Ed Richards, Ofcom Chief Executive, 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.”
It will take time for communications providers to make changes to their respective systems, so Ofcom has laid out a timetable for rollover contracts to be removed from the UK market. The sale of ‘opt-out’ rollover contracts to consumers and small businesses will be prohibited from 31st December 2011, whilst all customers currently on rollover contracts must be shifted on to alternatives by 31st December 2012. The definition of a small business is companies with ten employees or less.
You can read the full Ofcom statement on ARCs here.