Orange defends 36 month contracts as new EU law looms

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With new EU laws expected to come into place in May – banning three year phone contracts- operator says 36 month deals were “good value”

Orange has defended selling its customers 36 month contracts despite confirming its plans to scrap them in order to abide by new EU legislation, expected to come into place on May 1.

The new laws, first proposed in November 2007 and confirmed at the end of last year, outlaw contracts longer than 24 months and force operators to offer consumers 12 month deals.

Figures released this week by price comparison website uSwitch showed over 3,300 people signed onto 36 month contracts in 2010 – a figure it called “alarming”.

The same figures, which were compiled by a survey which polled 4,000 mobile phone users also found that 39 per cent of all phone users were locked into 24 month contracts while only 12 per cent had a one year deal with their operator.

uSwitch technology expert Ernest Doku said 36 month contracts in particular were not consumer friendly – something Orange disagrees with.

“It’s alarming to see how popular 36 month deals have become,” Doku said.

“It’s no bad thing that the EU is culling these in their infancy – three years is a lifetime in the world of tech.

“Consumers could easily find themselves saddled with a an obsolete phone, not to mention a contract that no longer suits their needs.”

Orange said 36 month deals were part of offering its customers a variety of contract options.

An Orange spokesperson told Mobile News: “We introduced our 36 month mobile tariffs on June 1 2009 to offer customers some of the best value pay monthly plans available – starting at just £5 a month.

“Although we appreciate that these 36 month tariffs aren’t for everyone, they’ve proven popular with customers who don’t want to go through a top up process, are happy to commit to a contract and want the security of knowing they won’t run out of credit.

“We also include a phone as part this package at no extra cost and customers can replace this half way through their contract so they don’t need to worry about their handset wearing out.”

Orange said depite this, it would remove 36 month contracts from its product basket by May 1 in order to comply with the the EU regulations.

It also pointed out it offered 12 and 24 month contracts.

O2, Vodafone, T-Mobile and Three all said they do not offer 36 month contracts and so the laws regarding such deals would not affect them.

12 month contracts

IHS Global Insight research analyst Peter Boyland believes the the new EU laws are a step in the right direction but doesn’t believe forcing operators to offer 12 month contracts will change the type of contracts consumers currently chose.

He said 24 month deals, whilst producing large revenues for operators do offer consumers good value for money.

Boyland said: “I think most people will look at all the options if they want to upgrade to a smartphone – they will look and see how much it costs on a 12 month plan and how much it costs on a 24 month plan.

“Its important to remember that contracts are affected by other terms and conditions and perhaps by one thing in particular – mobile broadband.

“At the moment people are looking at unlimited use so I think that is going to have as much of an effect on on the take-up of contracts as the actual price of the contract.

“There is no point taking out a contract on 12 months for a device like the iPhone 4 and getting say, a kilobyte a month of data because you are not going to get the best out of the handset.

“On a 12 month contract you are basically paying for the privilege of only being locked in for only one year.

Orange, O2, Three and T-Mobile all currently offer 12 month SIM only plans while Vodafone earlier this month reintroduced the option to purchase a smartphone on a one year deal.

This means all operators will also be inline with the EU laws in this regard.

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