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So what? They invoke a clause in the contract saying they can give you X weeks notice, and at the same time offer you an alternative to accept a lower rate. Nothing outside the contract...
Anyhow as said, mobile companies have to lock you in to get the money back on the hardware they give you for free (or heavily subsidised).
Note that you maybe just got a bad guy on the phone... if you try again and are very polite, spinning them a sob story about being unemployed and how you "obviously have to keep to the contract, but I'd really appreciate it if you can put me on a lower tariff, even on a longer term"... maybe someone more helpful will be nicer.
Worth a try anyhow.