Some of the UK's mobile phone service providers have reacted with almost hostility to the proposals to outlaw "unfair" contract terms in mobile phone contracts. The concerns voiced by the Federation of Communication Services (FCS) come as a result of an Office of Fair Trading pronouncement early last week that it did not like the cellular industry's unfair contract terms.

As reported last week by Newsbytes, the Office of Fair Trading (OFT), the British government-appointed consumer watchdog, bared its teeth over what it calls "unfair contract terms" that many cellular networks and their agents are imposing on cellphone subscribers. In a warning to the UK's cellular business, John Bridgeman, the OFT's director general, said that mobile phone companies must drop what his office terms "unfair terms" in their contracts or face legal action from the government.

According to the FCS, however, the cellular industry is already in discussions with consumer groups to address many of the points raised by the OFT.

David Savage, chairman of the FCS cellular service provider group, the criticisms from Bridgeman against service provision contracts are both misinformed and unfairly slanted, "in view of the current discussions taking place in the industry. Furthermore, work is nearing completion within the service provision sector on finalizing an industry code of practice which includes a choice of contract to the consumer."

The FCS argues that some of the "unfair" clauses in mobile phone contracts in the UK are, in fact, vital if the industry is to continue to offer mobile phone handsets at "attractive" prices. The FCS claims that subscribers have benefited from substantial subsidies against the true cost of the phone. In order to support their subsidies, service providers have a "minimum contract" term.

Savage said that market research suggests that most new mobile phone users prefer the cheaper handset option, but he accepts that the consumer needs to have a choice at the point of sale.

"Most of the criticisms leveled by the OFT are in the process of being addressed," he said. "I'm disappointed that this damaging and unnecessary announcement gives a negative viewpoint on the spirit of cooperation that has been established between service providers, the OFT, OFTEL, and the consumer's representatives."

Richard Cox, a consultant with telecoms consultancy Mandarin Technology, told Newsbytes that he felt that the so-called "attractive prices" have, in fact, been most damaging to the industry, as they have fooled the consumer into expecting a "cheap phone." "Until we remove the subsidies for handsets, users will not get the best deal on their overall mobile phone package," he said, adding that, while the subsidies are reclaimed in the form of high line rentals and usage charges in the first year, most subscribers keep their phones for longer than a year, resulting in high profits for the cellular networks and airtime providers.

"This clearly isn't in the best interests of the consumer," he said.