Today Ofcom announced that charges that consumers face for leaving their landline phone contracts early will be cut by as much as 85%.

Over the past year and half, Ofcom has been working with BT, TalkTalk and Virgin Media, UK’s three biggest landline providers, to reduce the cost that customers incur when terminating their contract early (early termination fee). Ofcom wants the early termination fee to reflect the costs that the providers save by no longer providing the service. Cheaper early termination fees will also apply to customers who take out broadband in the same package. The providers have different costs to account for therefore, the charges will vary between providers.

Early termination charges for popular packages*

* Table from Ofcom press release

· TalkTalk introduced its new charges on 1^st June 2010 (except for Tiscali, where charges will change on 1^st November 2010)

· Virgin Media will introduce the new charges in August

· BT will introduce the charges in October 2010

Ofcom is not going to stop here, other landline providers are expected to follow suits and reduce their early termination fees.

Ofcom claims that it is working on applying the same principal on other areas of communication. Broadband as a part of a PSTN contract falls under this agreement. However, customers taking out a broadband connection separate from their PSTN contract will not benefit.

Also when will Ofcom start working with the mobile operators to cut early termination fees? When and if that happens what will the implications on the handset subsidies that UK mobile customers already get from the operators?

Teligen monitors price developments of this sort in its monthly updates of T-World Fixed http://www.strategyanalytics.com/default.aspx?mod=NavigationHeader&a0=202&a1=0

Jóhanna Helgadóttir – Senior Consultant – jhelgadottir@strategyanalytics.com