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O2 Online - Can They Do This??

I have had a contract with O2 since the BT Cellnet days (not that this means anything to them!) and am due for my yearly upgrade. I am currently paying £20 a month for 500 anytime mins and 500 texts. I called them today to enquire about reneweing my contract to see what goodies I could get. Expecting a nice story I was shocked to hear that ¨in december your contract will be going up to £35 a month anyway as we no longer offer discounts¨

Are they ok to do this? Wouldnt it require me signing into a different contract or are they entitled to do whatever they like after my 12 months is up??

Any advice on how I should approach a new deal would be welcomed! i.e. what deal to tell them ive been offered by Orange etc...

Thanks in advance!

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