Ofcom urged to crack down on mobile phone bills after O2 price increase

Ofcom has been urged to crack down on mobile phone bills after O2 announced a surprise price increase.

Liz Kendall, the Technology Secretary, has asked the regulator to carry out a rapid review of how easy it is for customers to switch providers following the unexpected price increase.

In a letter to Dame Melanie Dawes, the Ofcom chief, she also called on the regulator to consider adopting a similar regime to the insurance sector, where existing customers are offered the same deals as new customers when looking to renew.

It comes after O2 last week said mobile bills would rise by £2.50 a month from April, equivalent to £30 a year.

That is 40pc higher than the £1.80 increase customers were told when signing up to their contracts.

The price increase, which comes less than a year after Ofcom introduced new rules cracking down on inflation-busting price rises, has sparked a furious response from consumer rights groups.

Martin Lewis, the founder of Money Saving Expert, said the move “makes a mockery of the regulator’s consumer protection regime”.

He added: “The worry is now O2 has opened the door to this behaviour, other mobile firms will feel less worried about following suit.”

Ofcom last week branded the price rise “disappointing”, adding: “This goes against the spirit of our rules, which are designed to ensure greater certainty and transparency for customers when they sign up.”

The new rules, which came into force in January, state that telecoms providers must set out any mid-contract price rises in pounds and pence and must be clear about when any changes will occur.

Prices were previously often linked to inflation, leaving customers with little clarity over how their bills would change. Many were hit with price increases of as much as 15pc as inflation surged at the height of the cost of living crisis.

O2’s decision to increase prices by more than expected means customers are entitled to leave the company free of charge within 30 days.

However, Ms Kendall urged Ofcom to review how easy the switching process is and share views on any further measures to increase transparency in telecoms pricing following similar rule changes for electricity bills.

She also said telecoms providers should inform customers with contracts predating the new rules about any upcoming price rises in pounds and pence.

Ms Kendall said: “I believe we need to go further, faster. I am keen that we look at in-contract price rises again. O2’s recent decision to increase prices above the levels specified in the contract means that, under Ofcom’s rules, its customers can leave free of charge within 30 days.

“I would welcome your undertaking a rapid review on how easy it is for customers to switch providers – if companies are determined to increase pricing, it is beholden on us to make sure that customers are able to go elsewhere as easily as possible.”

An Ofcom spokesman said: “We share the Government’s concern that customers who face price rises must be treated fairly by mobile providers and they are empowered to exercise their right to switch penalty-free if they didn’t agree to them upfront. We will respond to the Secretary of State’s specific queries shortly.”

An O2 spokesman said: “As acknowledged by Ofcom in its letter to providers last week, its rules do not prevent companies from increasing annual price changes – for example, to invest in improving networks for customers.

“A price increase equivalent to 8p per day is greatly outweighed by the £700m we invest each year into our mobile network, with UK consumers benefitting from an extremely competitive market and some of the lowest prices compared to international peers.

“We appreciate that price changes are never welcome, but we have been fully transparent with our customers about this change, writing directly to them and providing the right to exit without penalty if they wish.”