What Are Early Termination Charges

Nearly all Internet Service Providers will charge a fee to break a fixed term contract early.

12:34 23 May 2017

Nearly all Internet Service Providers will charge a fee to break a fixed term contract early, the amount of which will vary dependant on the length of contract remaining and the products you have contracted for. We’ll take a look at why Internet Service Providers do this and the rules to which they have to abide.

 

Why Do Internet Service Providers Charge an Early Termination Fee (ETC)

 

Simply put if you enter in to a fixed term contract with your supplier they will usually do the same with their wholesale line and broadband provider (eg.BT Wholesale) for the same duration in order to reduce the wholesale cost of providing services. You’ll often see that longer contracts offer cheaper monthly recurring fees and that reflects the discount your ISP is getting from their wholesale provider.

 

If you choose to end your fixed term contract early, your provider still has to pay out the rest of the contract term to their wholesaler.

 

What Rules Do They Abide By When Calculating A Fair Early Termination Charge?

 

OFCOM’s view is that consumers who terminate their contracts early should never pay more than the payments left in the contract and that the Early Termination Fee calculation should also reflect costs that your provider saves by no longer having to provide the service.

In order for an Early Termination Fee to be payable OFCOM state that:

 

·         Before you agree to the contract, the minimum contract period must be clearly explained (or highlighted if in written format) and easy to understand

 

·         Your new provider must explain that you are at risk of paying an Early Termination Fee if you end the deal early and how much that is likely to be.

 

·         The Early Termination Fee must not be more than the amount you would have paid if you had fulfilled your minimum contract term and

 

·         The final charge should reflect any savings from not having to provide services once you have cancelled and / or anything they can resell.

 

 

When Can You Cancel Without Paying An ETC?

 

Cancelling with your provider without incurring ETC’s can be done:

 

·         After your minimum contract term has expired

 

·         At anytime before your services go live*

 

·         Within your 14 day cooling off period, regardless of whether your services are live or not

 

·         If your provider increases your core subscription charges or makes changes to their terms and conditions.

 

Let us take a look at each of these in a little more detail

 

After your minimum contract term has expired

 

If you took a 12 month contract your contract start date will be the day that your services went live so your contact end date will be exactly 12 months from that date. It’s worth noting here that instead of looking to cancel you may be as well speaking to your provider’s retention team to see what new deals they will offer you now that you’re out of contract.

 

At anytime before your services go live

 

*You can cancel at any point before going live without incurring Early Termination Charges. Going live means that your provider is supplying you with either line rental or broadband. The only thing to bear in mind here is that most providers will class an order at the “Point Of No Return” as being live as they are unable to cancel with their wholesaler at this point. The “Point Of No Return” is generally the 24 hour period before your services are activated. Point of no return is only an issue outside of your 14 day cooling off period.

 

Within your 14 day cooling off period, regardless of whether your services are live or not

 

Regardless of whether your Internet Service Provider has activated your line or broadband early, if you’re in your 14 day cooling off period offered to all consumers under the Consumer Contract (Information Cancellation & Additional Charges) Regulation 2013 then you can cancel without penalty. Your 14 day cooling off period starts the day after you place your order. Please be aware that you may still be liable to charges for equipment that may need returning or any additional charges for products already provided to you before the end of your cooling off period.

 

If your provider increases your core subscription charges or makes changes to their terms and conditions.

 

Assuming your contract was made after January 2014, should your provider raise your subscription price on core services such as line rental, broadband or calls, or reduce the number of minutes you receive in call bundles for example and the changes to your terms is to your material detriment then you can break that contract, penalty free by providing 30 days notice. This is a little confusing, but all providers are required to let you know in writing, with at least 30 days notice and let you know that because of their changes to their terms and conditions that you can cancel without penalty and how to do so.