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Ban fixed duration contracts & Encourage competition

Comment 2nd July 2010

 

Most service providers like Phone providers, Broadband providers, Electricity Providers require a fixed term contract for their service. The contracts have to renewed for fixed terms only. This makes no sense. If a service provider incurs an initial cost of setting up the service then it should be allowed one of the two options: 1) charge a reasonable activation fee – which many companies still do, or 2) require a minimum duration of contract. There needs to be an upper limit like 3 or 6 months on this duration. Anything more than that is unreasonable in fast changing world of technology.  For example, if there is a new phone provider which provides cheaper calls using a breakthrough in technology, why should people be still stuck to a phone company that is being proved incompetent in the market.

An important change needed in regarding renewal of contracts. Once a customers first contract with a service provider is complete. There are no sensible business reasons to force customer into another long term contract. The Law should require that contracts become renewable on a monthly basis after the first contract / minimum service period is complete.

Why does this matter?

1. If the customer can terminate the service at any time the service provider is forced to maintain their quality of service.

2. It will allow new companies to break into market easily, encourage more competition and lead to efficient businesses.

3. Gives freedom of choice to the customer.

4. When relocating from one part of the country to another, the quality of service provided by a company does not remain same (e.g. for mobile phones, or broadband). Then customer should not be forced into putting up with poor service at new location because of an existing contract.

5. More competent British business will be able to make more money in foreign markets 

6. An efficient British business is less likely to go bankrupt or run into financial problems and thus provide better job security to its employees.

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