Ofcom has unveiled proposals to curb unfair additional charges levied by telco providers on consumers' bills.

The watchdog warned that increasing competition has driven down headline prices and offered consumers more choice, but that falling headline prices are not the whole picture.

Ofcom is proposing new guidance on communications providers' obligations under the Unfair Terms in Consumer Contract Regulations 1999 to ensure that additional charges are fair and transparent.

The proposals will ensure that extra charges brought by providers are fair, and that landline, broadband, mobile and pay-TV providers clearly market the true cost of their services.

Ofcom is proposing to give communications providers three months to comply, after which it will start an enforcement programme to bring legal action where necessary.
"Consumers are benefiting from greater competition and lower prices, but to get an all round fair deal they need to know the full costs of the services they are buying," said Ofcom chief executive Ed Richards.

"Our proposals will encourage companies to be open and straightforward about additional charges where they feel it is necessary to include them.

"In some cases, additional charges will be subject to clear limits to provide direct protection for consumers."

The draft guidance has two main principles. Providers must be clear and upfront, and do more to make it easy for consumers to understand the charges; and charges that are not part of the price of a main service under the contract must be demonstrably fair.

Specifically, Ofcom is targeting providers which do not advertise extra charges for paying by cash or cheque, which it also says must reflect direct costs only and not be an opportunity to collect further revenue.

The guidelines also include protection for low income households, greater customer awareness of charges for late or failed payments, and minimum contract periods and charges for cancelling contracts.

Similarly, providers must make clear the length of contracts, as well as the costs involved if a consumer chooses to break a deal.

Subsequent contract periods should not be imposed unless there is a clear benefit to the consumer and cost to the provider. A customer who ends a contract early should never have to pay more than the payments left under the contract period.

Ofcom is seeking views from the public on the draft guidance. The closing date for responses is 8 May 2008. The final guidance is due in autumn 2008.