E.CA Compact

Automatically renewable contracts hamper switching to competitors

On behalf of Ofcom, E.CA and Gregory Crawford empirically analysed the impact of BT’s automatically renewable contracts on customer switching behaviour between telecom providers. Accounting for a variety of confounding factors, including tenure, bundling, price discounts and self-selection into contracts, it was found that households on automatically renewable contracts switch 35% less often than comparable households on standard contracts. In light of these findings Ofcom decided to prohibit these contracts in the fixed-line voice and boradband sectors for residential and small-business customers.

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Keywords: switching, telecoms