Examining the Changing Cost of UK Phone Line Rental and its Future

Inflation has long been believed to play a key role in the annual line rental rises and some providers have in the past used it as an excuse, although that theory appears to have taken a hit after BT and TalkTalk announced their 2015/16 line rental hike and increased the standard monthly price to nearly £18 (this is roughly in keeping with previous rises).

However over the same period the Consumer Price Index (CPI Inflation) has remained virtually flat, sitting at around 0.1% (12-month rate from July 2014 to July 2015) and even the 12-month rate for RPIJ stood at just 0.4% or 1% for traditional RPI. All these measures are well below previous years and yet the line rental increases appear to be totally unaffected.

History of UK Inflation
2011 – 4.5%
2012 – 2.8%
2013 – 2.5%
2014 – 1.5%
2015 – 0.1% (August 2015 Prediction)

NOTE: The Government inflation target tends to be 2%, but in practice a country’s economy is dynamic and difficult to control.

We should point out that some of the big ISPs also offer an annual pre-paid “Line Rental Saver” or “Value Line Rental” discount, which saves a few pounds per year off the normal monthly cost, but this too has also been steadily increasing in price and now tracks much more closely with standard rental, only a little cheaper. Some ISPs, such as Sky Broadband, have also scrapped it.

The Broadband Impact

Ofcom’s Q4 2014 fixed line statistics reveal that, despite all of the upheaval in prices and lower consumer usage, the UK ended 2014 with 33.2 million fixed lines (25.49m residential and 7.744m business) and that was down by just 0.2% on the end of 2013, although residential lines actually increased by +524,000 over the same period (i.e. the decline came from businesses).

The above figure represents both traditional style phone (PSTN) and ISDN lines from all of the major telecoms infrastructure providers, which includes lines that are actively delivering broadband (Internet connectivity is usually carried down the same physical line as your phone service). Ofcom’s separated figure for small business and residential broadband lines came to a total of 23.73 million for 2014 (up from 22.8m in 2013).

One thing all of this data consistently tells us is that the rising line rental prices and lower voice call revenues are not being converted into a mass move away from fixed line connections, which isn’t surprising because you still need one of those lines to deliver broadband and that’s true regardless of whether it’s copper, coax or pure fibre optic (i.e. some sort of charge for the physical line must always exist).

Meanwhile most people continue to view alternative Internet connectivity services, such as Mobile Broadband, as more of a complement rather than a replacement for fixed line broadband (largely due to the higher cost of mobile data and other service restrictions). Similarly a poll of 998 ISPreview.co.uk visitors conducted last year found that 64.3% of respondents would happily get rid of their phone line if it wasn’t still required for their home broadband connection (captive market?).

Ultimately the actual voice calling component of “phone line rental” only accounts for a very small slice of the overall service cost and, when taken together, all of the above factors would thus appear to suggest that ISPs are using line rental increase as a means to off-load the rising costs of broadband provision (this may also help to make their broadband prices seem lower).

We subsequently questioned BT on their latest price rise and asked what aspects had specifically caused the most recent hike, particularly given the flat level of inflation.

A BT Spokeswoman told ISPreview.co.uk:

“We are sensitive to the economic times and we realise no-one welcomes a price rise. We are investing heavily in order to offer some of the best value bundles of lines, superfast Infinity broadband and TV for new and existing customers. We have looked after the most vulnerable customers by keeping BT Basic the same price of just £5.10 a month and adding the option of a broadband bundle for just £9.95, which is the cheapest in the UK.

Specifically, at BT, a line and Infinity is now 23 per cent cheaper than five years ago. We are also giving value back with a ‘double your data’ offer for broadband customers who sign another contract. For example, a broadband customer on a 10Gb allowance would upgrade to a 20Gb allowance for free.”

The response was somewhat of a canned statement and one that unsurprisingly avoided answering our question, but when we put this concern to them they did at least confirm that the investments they make “affect all our rises“. None of this is unique to BT and most of the other big ISPs play the same game. More over the page..