Landline telephone contract fees to be cut

The three big landline telephone firms - BT, TalkTalk and Virgin - have agreed to make big cuts to the cost of ending their deals early.

The telecoms regulator, Ofcom, has told them to cut their "early termination" charges by up to 85%.

The one-off fees levied on their customers will fall from as much as £33 to as little as £2.

The firms agreed to the change despite arguing that their fees were not unfair.

All other landline phone suppliers have been told to follow the example of the big three or face formal action by Ofcom.

Ofcom said: "We very much welcome the reductions made by BT, TalkTalk and Virgin Media which mean that consumers will face much lower charges if they wish to end their contracts early."

The regulator said it had been looking at the issue for 18 months.

People who ended their deals early have to pay a charge supposedly based on the money they would have to pay under the remaining term of their contract.

But Ofcom argued that the firms were failing to take into account the fact they they no longer had to bear the cost of supplying their phone service to those households.

"If a customer leaves within the minimum contract period that they signed up to, they are charged the amount we expected to receive from them, less the costs we save as a result of them leaving early, as this is what we are legally entitled to," said a BT spokesman.

"However after discussions with Ofcom, we have agreed to reduce these charges for landline (or landline plus broadband) services over the coming months, to help them reach an industry-wide agreement on charges. "

TalkTalk has already cut its early termination fees from between £33.48 and £14.44 to between £8 and £3.

BT's fees will come down in October, from between £8 and £7.50 to between £5 and £2.

Virgin will also cut its fees in October, from between £29.99 and £11.99 to between £8.35 and £4.

The government's recently established consumer watchdog, Consumer Focus, said the cheaper charges were good news.

"The scale of these reductions shows how badly landline providers have been overcharging people up until now," it said.

"It is still best if people avoid early termination fees altogether so phone companies must make sure consumers know exactly what they are signing up for in the first place."