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Third Time Unlucky? The Legal Effect of Threes Decision to Raise Prices
Andrew Dyson, University of Oxford (Updated 10/06/2012)

A. Introduction
Following similar moves by Orange and T-Mobile, Three recently sent its Pay Monthly customers an email giving notice that it would be increasing their monthly payments by 3.6%, effective from 16th July 2012. The increase applies to all Pay Monthly customers except those who joined Three on or after 8th March 2012. On its website, Three states:
Our terms and conditions allow us to raise prices in line with inflation so that we can cover our business costs. This means that you won't be able to leave your contract early as a result of this change.

But is this assertion correct? As so often with consumer contracts, there seems to be a widespread assumption propagated by companies and accepted by consumers that the customer services departments of large corporations have the last word on contractual interpretation and on the rights of the consumer. But this is not so. Whilst issues of contractual interpretation can only be definitively decided in legal proceedings, it is possible for anyone with a working knowledge of contract law to assess the arguments. Threes terms and conditions differ in significant respects from those of other network providers, so the position is by no means settled. The purpose of this paper is to examine the likely legal consequences of the notice recently issued by Three, with particular regard to the validity of Threes purported contractual variation, and the effect of its notice on customers express right to terminate for contractual variations that are likely to be of [material] detriment to them.

B. Disclaimer
Threes decision gives rise to several interesting issues of contract law. This paper forms a general discussion of those issues, written in a manner that it is hoped will be accessible to non-lawyers. I do not suggest that the arguments raised here are exhaustive; the paper is not intended as a legal opinion, skeleton argument, or any other form of legal advice. I do not assume any responsibility for reliance upon the contents of this paper and I exclude liability for the consequences of any such reliance. Subject to the foregoing, I welcome comments on the paper. Please email comments to andrew.dyson@law.ox.ac.uk.

C. Pay Monthly Contracts in Context

A Pay Monthly contract is an agreement between a mobile service provider and a customer for the provision of network services to the customer. The customers obligation to pay the price accrues on a monthly basis, and comprises a fixed sum plus a charge for services rendered during the preceding month. Hence the label, Pay Monthly. However, Pay Monthly contracts

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that include the provision of a handset on a free or discounted basis invariably incorporate a minimum term (usually between 12 and 24 months) during which the customer has only very limited rights to terminate the contract. The purpose of the minimum term is to ensure that the service provider recovers the initial cost of the handset, plus of course a margin of profit for the network services that it provides. In law, the handset becomes the property of the customer as soon as the contract is formed. However, the customer incurs a contractual liability to pay the monthly price of the contract for the duration of its minimum term, and in total the value of this liability comfortably exceeds the market value of the handset. Although the obligation to pay the contract price only accrues (i.e. becomes due) on a month by month basis, from the very first month of the contract the customer is already under a prospective obligation to pay the 18th instalment of the contract price at the end of the 18th month, and so on. Termination has the effect of cancelling the prospective obligations under a contract; that is, any obligations which have not yet accrued at the date of termination, never become due. Consequently, if a customer decides to terminate their Pay Monthly contract after the 9th month then the obligations to pay the contract price for the 10th, 11th, 12th months (etc) are cancelled because they have not yet accrued. However, unless the customer is terminating for a repudiatory breach by the service provider or pursuant to an express right to terminate provided for by the contract (these concepts will be explained below), then their notice of termination will itself constitute a repudiatory breach of the contract by the customer. In accepting the customers repudiatory breach, the service provider becomes entitled to full loss of bargain damages, which in effect secure the same revenue for the service provider as if the contract had not been terminated. Most customers who choose to end their contract before the expiry of the minimum term do not do so by committing a repudiatory breach. Instead they exercise an express right to terminate provided for by the contracts terms and conditions. Like termination for repudiatory breach, this express right to terminate also cancels the customers prospective obligations to pay the monthly contract price. However, it replaces them with an immediate liability to pay a fixed sum. This fixed sum, known as the Cancellation Fee, is generally equal to the total value of the prospective obligations to pay the monthly contract price minus a nominal deduction (in Threes case, 3%). Accordingly, ordinarily there is no advantage to a customer in terminating their contract prior to expiry of the minimum term, because whichever way they do it they will end up paying the same (or nearly the same) as if they had completed the contract in full.

D. Two Arguments in Customers Favour

In an email sent on 25th May 2012, Three gave notice to its Pay Monthly customers that: From 16 July 2012 were changing our prices and putting up your monthly bill by 3.6%. The notice applies to all existing Pay Monthly customers except those who joined Three on or after 8th March 2012. There are two main legal issues raised by the notice. First, it is arguable that the purported contractual variation is not binding where the customer contracted as a consumer. If so, the price increase would not be legally binding either, and customers who refused to pay it would not be in breach of contract. Second, it is strongly arguable that the notice has triggered an express right to terminate contained in Threes terms and conditions, the exercise of which would not incur liability to pay a Cancellation Fee.

1. The price increase is not binding on consumers

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i) The legal context

One might suppose that once a contract has been formed, it should never be possible to change its terms without the agreement of both parties. For most contracts, this is correct. Indeed, even where parties do agree to a variation, the doctrine of consideration may deny it legal effect if one party is effectively demanding more without giving any more in return. However, it is perfectly possible for a contract to provide expressly that one party has the right to vary the terms without further agreement. For instance, large scale building contracts often contain contractual variation clauses. There is nothing inherently objectionable about these clauses; it may sometimes make very good sense for the parties to build into their contract a certain degree of flexibility, even on important terms such as price. However, if the contract does not contain a contractual variation clause, or if the contractual variation clause is for some reason legally ineffective, then an attempt by one party unilaterally to vary the terms will simply have no legal effect. The rights and obligations of the parties will remain just as they did before the purported variation. Furthermore, if the party purporting to make the variation (which is in fact ineffective) then proceeds on the basis that the variation is binding on the other party, in doing so they may conduct themselves in a way which places them in breach of contract.

ii) Clause 4.1

Three has said that it will be increasing the price of its Pay Monthly contracts by 3.6% with effect from 16th July 2012. In doing so, it seeks to vary one of the contractual obligations owed by its Pay Monthly customers (to pay the price of the contract), by reference to an express contractual variation clause contained the contracts terms and conditions. Clause 4.1 provides that:
4.1 We may vary any of the terms of your agreement, including our Packages, on the following basis: (a) any updated Packages and new terms will be available on our website and on request to Three Customer Services; (b) we will let you know at least one month in advance if we decide to: (i) discontinue your Package; or (ii) make any variations to your agreement which are likely to be of detriment to you; or (iii) increase the fixed periodic charges for your Package (if applicable) by an amount which is more than the percentage increase in the Retail Prices Index Figure (or any future equivalent) in any twelve month period. (c) if you carry on using Three Services after the variation commences, you will be deemed to have accepted the variation.

iii) Does Clause 4.1 cover Threes price increase?

Clause 4.1 entitles Three to vary any of its terms provided that it fulfils the limited requirements contained in sub-clauses (a) and (b). It should be emphasised that both of these requirements concern only the level of notice that Three must give to its customers when implementing variations. Neither of the sub-clauses purports to limit in any way the range of contractual variations that are allowed under Clause 4.1 provided that requisite notice is given. Sub-clause (a) requires that all new terms must be notified to customers via their website and on request to Customer Services. Sub-clause (b) adds a further notification requirement for more onerous types of variation. In order for these more onerous types of variation to be legally effective,

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Three must let customers know about them at least one month in advance. Consequently, it is misguided to focus on whether the 3.6% price rise exceeds the percentage increase in the RPI (arguably it does, since the most recent 12 month RPI increase for April is only 3.5%). This issue is a red herring. Clause 4.1 allows Three to make any variation that it likes, so long as it properly notifies customers first. Three could in theory increase its prices by 1000% and this would still be allowed under Clause 4.1 so long as they jumped through the right notification hoops first. On this occasion, Three has fulfilled the requirements of Clause 4.1(b) by sending an email to customers on 25th May, one and a half months before the price increase becomes effective. Whether or not this means that Three implicitly regards its price increase of 3.6% as one which constitutes a type of variation listed in Clause 4.1(b), is uncertain.

iv) Is Clause 4.1 legally effective?

The Unfair Terms in Consumer Contracts Regulations 1999 can deny legal effect to a contractual term under certain circumstances if, contrary to the requirement of good faith, it causes a significant imbalance in the parties' rights and obligations arising under the contract, to the detriment of the consumer (Regulation 5(1)). It is arguable that Clause 4.1 would be regarded as unfair within the meaning of this Regulation. It is necessary to make two preliminary comments. First, the 1999 Regulations can only be relied upon by those dealing as a consumer; consequently, individuals who obtained their contract for business or professional purposes would not benefit from protection (Regulation 3(1)). Second, so long as a term is in plain intelligible language, the assessment of fairness cannot relate to the adequacy of the price or remuneration, as against the goods or services supplied in exchange (Regulation 6(2)(b)). Consequently, Clause 4.1 could not be regarded as unfair purely on the basis that Threes price rise makes its Pay Monthly contracts uncompetitive. Instead, one must focus on Threes purported entitlement to vary its terms and conditions entirely without limit, except for the scant procedural protection provided by the notice requirements. It is arguable that for this reason Clause 4.1 causes a significant imbalance in the parties rights and obligations within the meaning of the 1999 Regulations. Put shortly, Clause 4.1 allows Three to alter the customers obligations in any way it likes (and to whatever extent it likes), but the customer cannot alter Threes obligations at all. The Regulations indicate that a term may be regarded as unfair if it has the object or effect of enabling the seller or supplier to alter the terms of the contract unilaterally without a valid reason which is specified in the contract (Schedule 2, Para 1(j)). It may be argued that Clause 4.1 is not unfair, because if customers do not like a variation then they are free to terminate their contract in accordance with one of the provisions contained in Clause 10.1. However, as explained above (Pay Monthly Contracts in Context), the option to terminate under Clause 10.1(b) is illusory: it incurs payment of a Cancellation Fee that is equal (minus 3%) to the amount that would be owed anyway if the contract had survived to the end of the minimum term. There is never any advantage to customers in availing themselves of Clause 10.1(b). In practice, the only option that is of any practical use to customers is therefore the right to terminate under Clause 10.1(d). Consequently, the availability of a right to terminate under Clause 10.1(d) is the only way that the fairness of Clause 4.1 could be saved.

v) Consequences if Clause 4.1 is legally ineffective

It is arguable that Clause 4.1 would be regarded as unfair under the Unfair Terms in Consumer

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Contracts Regulations 1999. If so, the clause would not be binding on a customer, provided that they qualified as a consumer within the meaning of the Regulations. In turn, Threes increase in price would have no contractual basis. In the absence of a valid contractual variation clause then any purported unilateral variation simply has no legal effect; the rights and obligations of the parties remain just as they did before. Consequently, customers would only be obligated to pay the amount that they originally agreed under the contract. They would commit no breach of contract by refusing to pay more. Of course, Three evidently considers that it is entitled to increase its prices and so would not take kindly to a refusal to pay the extra sum. If a customer did refuse to pay the extra sum, Three would probably discontinue their network services. However, if Clause 4.1 is not legally binding on a customer (where that customer is a consumer), then by discontinuing the network services Three would itself be committing a breach of contract. Indeed, it would almost certainly be a repudiatory breach of contract under common law, which would entitle the customer to terminate without paying any Cancellation Fee.

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2. Customers have an express right to terminate (without incurring a Cancellation Fee) under Clause 10.1(d)
i) The legal context
A contract may be terminated in accordance with an express right to terminate, where such a right is provided for by the contract. An express right to terminate does not necessarily have anything to do with a breach of contract; it could be drafted to arise for any number of reasons. For instance, a supermarket might create a contract to buy one thousand St Georges flags per week from its supplier, with an express right to terminate if England fails to reach the semi-finals of Euro 2012. If and when that happens, the supermarket could terminate even if the supplier had always delivered on time, had always delivered good quality flags, etc. There need be no breach of contract in order for the right to arise. The legal consequences of exercising an express right to terminate are generally drafted as part of the contractual term which gives rise to the right. For instance, Pay Monthly contracts usually give customers an express right to terminate their contract prior to the expiry of the contracts minimum term, but the exercise of this right triggers a liability to pay a Cancellation Fee. The role of these cancellation fees in the overall business model of mobile service providers has already been discussed (see Pay Monthly Contracts in Context). Suffice it to say that the exercise of this type of express right to terminate is rarely advantageous to the customer.

ii) Clause 10.1(d)

The terms and conditions of Threes Pay Monthly contracts include several different express rights to terminate. One of these is the general early termination clause just described, according to which the customer must pay a Cancellation Fee (Clause 10.1(b)). However, the terms and conditions also give customers a separate express right to terminate under Clause 10.1(d). The wording of this clause varies slightly depending upon whether the contract is for iPhone or non-iPhone customers. The wording for iPhone customers is as follows:
10.1 You may end this agreement in the following ways: (d) Within one month of a detrimental variation to your agreement. You can end the agreement within one month of us telling you about a variation to your agreement (which includes your Package) which is likely to be of detriment to you. You must give notice to Three Customer Services within that month and your agreement will finish at the end of that month once we receive your notice. (A Cancellation Fee will not be charged.)

The equivalent clause for non-iPhone customers is identical except that it adds the word material to qualify the type of detriment required. The likely relevance of this addition (if any) will be considered in due course. For now, this paper considers the interpretation of Clause 10.1(d) as it applies to iPhone customers, that is, without the material qualification. Clause 10.1(d) must be read together with Clause 4.1, which states:
4.1 (b) we will let you know at least one month in advance if we decide to: (i) discontinue your Package; or (ii) make any variations to your agreement which are likely to be of detriment to you; or (iii) increase the fixed periodic charges for your Package (if applicable) by an amount which is more than the percentage increase in the Retail Prices Index Figure (or any

[Do not reproduce or distribute without the express permission of the author] future equivalent) in any twelve month period. You can end the agreement for such variations as explained in Section 10. Subject to the above, you will not be able to end the agreement if such variation or increase: (i) is due to changes to the law, government regulation or licence which affect us; or (ii) relates solely to Additional Services; or (iii) relates solely to Add-on(s) (if applicable to you). In such circumstances you will not be able to end your agreement but you will be able to cancel the Add-on(s) by giving us 30 days written notice;

iii) The role of contractual interpretation

In order to assess whether or not Clause 10.1(d) covers Threes recent notice to increase its prices, it is necessary to interpret the relevant contractual terms. The process of contractual interpretation is governed by established legal principles. The fact that Three Customer Services says (no matter how adamantly) that a term means X, does not make it so. Only a court can definitively interpret a contractual term. Furthermore, it is commonly accepted by the courts that there is very little merit in comparing similar cases unless the wording and context of the relevant contractual terms matches exactly. There is even less merit in comparing the interpretation of words contained in non-contractual documents. The significance of this feature of contractual interpretation will become apparent below. The legal principles governing contractual interpretation may briefly be summarised as follows: 1. The aim of contractual interpretation is to ascertain the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties at the time of contracting. 2. Background knowledge includes anything which would have affected the way in which the language of the document would have been understood by a reasonable person. 3. The process of interpretation is purposive, in that it takes into account the purpose of the term rather than just the literal meaning of the words used.

iv) Does Clause 10.1(d) cover Threes notice to increase prices?

It is strongly arguable that Clause 10.1(d) applies to Threes notice to increase its prices by 3.6%. There are several arguments in favour of this interpretation: First, a variation that requires customers to pay more for the same service is objectively detrimental in a way that many potential variations to Pay Monthly contracts are not. For instance, if Three had proposed to vary one of its Packages so that a customer who previously received a monthly allowance of 500 texts and 100 minutes instead received 400 texts and 120 minutes, then it would probably be necessary for the customer to show that they actually used their final 100 texts and that it would not be sufficient for them to use an extra 20 minutes of calls instead. But it is always, definitively and objectively, detrimental to have less money. This basic economic assumption is recognised by virtually everyone on the planet and is reflected in various areas of English law (such as the concept of incontrovertible benefit in the law of unjust enrichment). Second, although Clause 10.1(d) could plausibly be interpreted to include a de minimis exception for variations whose detrimental effect was extremely minor, any such exception should not apply to a price increase of 3.6%. For instance, if Three varied its terms to allow it

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to round up the monthly value of call charges to the nearest penny, then we might be strongly inclined to say that paying more by a maximum of 0.5p per month was too minor to qualify as detrimental within the meaning of Clause 10.1(d). However, a price increase of 3.6% is likely to equate to between 0.50 and 2 per month for most customers. How might we test whether Clause 10.1(d) should apply to this amount? It is necessary to address this question step by step, beginning with the underlying test for contractual interpretation. Recall that the correct legal test is to ascertain the meaning that the word detrimental (in Clause 10.1(d)) would convey to a reasonable person with the knowledge of the parties at the time when they entered into the contract. Everyone knows that when initially choosing between network providers, customers are acutely sensitive to relatively small differences in monthly cost; the existence of an entire industry of comparison websites demonstrates this. In other words, everyone knows that customers consider that paying more for their network services even by 2 or less per month is detrimental to them; that is why they shop around for the cheapest plan. Network providers know this too; that is why their advertising routinely focuses on similarly small differences in monthly cost. The meaning that the word detrimental would convey to a reasonable person must be assessed with this background knowledge in mind. Third, Clause 4.1 does not affect the application of Clause 10.1(d) to a price increase of 3.6%. There is a possible argument to the effect that Clause 10.1(d) is limited in scope by an internal reference to Clause 4.1(b)(ii). However, this argument should be rejected. The argument runs that since the types of variation featured in Clause 4.1(b) are listed disjunctively, then in both Clause 4.1(b)(ii) and Clause 10.1(d) the phrase variations to your agreement which are likely to be of detriment to you must be intended to exclude the types of variation described in Clause 4.1(b)(i) and (iii): namely Package discontinuance and price increases above RPI. There are a number of reasons to reject the argument. First, it is doubtful that the list in Clause 4.1(b) is intended to operate disjunctively; this would be inconsistent with the structure of several other provisions in the contract. It is more likely that Clause 4.1(b)(iii) is merely a specific example of a type of variation to which Clause 4.1(b)(ii) also applies. Second, any internal reference between Clauses 4.1(b) and 10.1(d) is at best implicit; the terms make no express link between them. Third, Clause 4.1(b) concerns the notice requirements owed by Three; there is no reason to suppose that these must correspond with the scope of the termination options open to the customer. Fourth, if correct, the argument would lead to the absurd conclusion that a customer would be unable to terminate without incurring a Cancellation Fee when the variation was of a kind that would in ordinary parlance be of most detriment to them: namely, a Package discontinuance or a price increase above RPI. Fourth, Clause 10.1(d) should be interpreted with regard to the background provided by the Unfair Terms in Consumer Contracts Regulations 1999 (discussed above). The 1999 Regulations provide that a term may be regarded as unfair if it has the object or effect of allowing a seller of goods or supplier of services to increase their price without giving the consumer the corresponding right to cancel the contract if the final price is too high in relation to the price agreed when the contract was concluded (Schedule 2, Para 1(l)). This statutory background should be considered in assessing the meaning that Clause 10.1(d) would convey to a reasonable person. If Clause 10.1(d) does not extend to an increase in price of 3.6%, then consumers would be left without the kind of protection that the 1999 Regulations clearly support. Fifth, Regulation 7(2) of the 1999 Regulations provides that If there is doubt about the meaning of a written term, the interpretation which is most favourable to the consumer shall prevail This reflects (but is arguably more extensive than) the common law rule of contra proferentum. Consequently, if there was doubt about whether or not Clause 10.1(d) (properly interpreted)

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applies to Threes current price increase of 3.6%, then Regulation 7(2) would require a court to conclude that it does. Whether or not one is persuaded by the preceding arguments of this section, it is difficult (if not impossible) to deny that they at least raise doubt about the meaning of Clause 10.1(d). If so, Regulation 7(2) requires that the doubt is resolved in consumers favour.

v) What difference does the word material make?

Whereas the terms and conditions of Pay Monthly contracts for iPhone customers require only that a variation is likely to be of detriment to the customer in order to trigger an express right to terminate, the equivalent contract for non-iPhone customers stipulates that the variation must be of material detriment. However, it is doubtful that adding the word material makes any difference to the present price increase. The most plausible interpretation of Clause 10.1(d) is that material only affects the type of detriment required. It should not be interpreted as increasing the requisite extent of the detriment (although a less ambiguous word like significant may have achieved this effect). There can be little doubt that an increase in price of 3.6% is a material type of detriment; indeed, having less money is the archetypal material detriment. On the other hand, if the addition of the word material does seek to increase the extent of the detriment required, then where should the line be drawn: 3.6%, 10%, 20%? If we cannot be sure (because, unlike the contracts of other providers, Threes contract does not say), then this in itself is likely to constitute doubt sufficient to trigger the application of Regulation 7(2) in consumers favour.

vi) Some misconceptions and bad arguments

It is worth pre-empting and dispelling at least two misconceptions that so far appear to have led consumers and watchdogs off-course. Whilst it is impossible (in the absence of a judicial decision) to confirm the correct interpretation of Clause 10.1(d), it is possible to discredit some bad arguments relating to contractual interpretation. The first misconception is that the interpretation of Clause 10.1(d) is somehow resolved (against customers) by the OFTs decision not to pursue legal action against Orange, when they took a similar decision to increase prices. This is a bad argument for a number of reasons. As has already been explained, the issue is one of contractual interpretation, and contractual interpretation is a highly contextual exercise. Oranges terms and conditions differ in several important respects from Threes. For one thing Orange, unlike Three, expressly excluded the right to terminate for price increases that did not exceed the rate of inflation. Both the wording and context of Oranges terms are so different from Threes that there is very little merit in using the interpretation of one as a guide to interpretation of the other. Furthermore, the decision made by the OFT regarding Oranges price increase did not even concern (at least not primarily) an issue of contractual interpretation. Instead, it concerned the interpretation of OFCOMs General Conditions of Entitlement (specifically, Para 9.6(a)), which form part of a regulatory framework for network service providers. This regulatory framework is not a contract. It is nonsensical to suggest that the OFTs decision as to the interpretation of OFCOMs regulatory framework could be conclusive of the correct interpretation of any contractual term, let alone a term that has been propagated by a different network provider, and to which the OFT gave no consideration. It should be conceded that there is one limited way in which the OFTs decision could be of relevance. It could be argued that, just as the UTCCR 1999 should be considered as relevant background to the interpretation of Clause 10.1(d), so should Para 9.6(a) of the

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General Conditions of Entitlement. In considering Oranges price increase, the OFT concluded that material detriment under Para 9.6(a) was unlikely to cover price rises that were roughly equal to the percentage increase in RPI. However, this is not a final ruling on the meaning of Para 9.6(a). More importantly, even if it was then it could not retrospectively affect the meaning that Clause 10.1(d) would convey to a reasonable person at the time when Threes Pay Monthly contracts were entered into, since in almost every case this will have predated the OFTs decision. The second misconception surrounds the notion that customers will have to prove on a case by case basis that they are likely to suffer some tangible form of detriment as a result of Threes price increase. It misses the point to ask whether a customer will be worse off by so much that it affects their daily life (for instance, whether they can still buy food, or petrol for their car). These arguments only challenge the extent of the detriment; they do not address the fact that having less money whatever one plans to do with it is always worse than having more money. Being worse off by 1 per month might not be life-changing, but under the terms of Clause 10.1(d) the variation doesnt need to be life-changing; it only needs to be detrimental. It is highly unlikely that a court would require an individual to itemise their daily spending to show what actual effect a 3.6% price increase would have on them.

E. Conclusion
Threes price rise may be third time unlucky for the network provider. Unlike the previous two price increases implemented by Orange and T-Mobile, Threes decision may have at least two unforeseen legal consequences. First, its purported contractual variation to increase the price of Pay Monthly contracts for existing customers may not be legally binding where the customer is a consumer within the meaning of the Unfair Terms in Consumer Contracts Regulations 1999. Second, and perhaps much more importantly, it is strongly arguable that its notice has already triggered an express right to terminate under Clause 10.1(d) of the terms and conditions. Any customer who exercised that right would be freed of their remaining monthly payments without incurring the Cancellation Fee that usually attends termination within the minimum term. If the preceding analysis is correct, then what would be the consequences for Three and its customers? Three may consider it preferable to back down and abandon its proposed price increase before it begins. This would resolve the first of the legal consequences identified above. However, with respect to the second, the horse may already have bolted. Under Clause 10.1(d) it is the notice which triggers the express right to terminate, not the contractual variation itself. Three could publicly abandon its price increase, but this would only prevent customers from exercising their right to terminate under Clause 10.1(d) if they had not already done so. In the meantime, customers who are confident that Clause 10.1(d) applies to Threes recent notice may wish to exercise their express right to terminate, whether they can afford the extra 3.6% or not. It would almost invariably be to a customers financial advantage to terminate their contract prior to the expiry of the minimum term, provided that they can avoid the Cancellation Fee in doing so. This is because Pay as You Go and Sim Only contracts are much cheaper for customers who already own an unlocked handset. For these customers, Threes decision to raise prices may be an opportunity rather than an irritation.

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