UK Government Moots End to Separate Line Rental, But You Will Still Pay

The Government’s Digital Economy Minister, Ed Vaizey, risks shunning smaller ISPs by proposing a significant shift in the broadband and phone market, which on the upside could mean an end to separate line rental charges and clearer pricing. But you’ll still pay for the line.

According to reports (here and here), Mr Vaizey has summoned BT, TalkTalk, Sky Broadband and Virgin Media to attend a roundtable discussion before Parliament goes on its summer recess (21st July 2016). The discussion will focus on how to kill off the “outdated” system of line rental charges, which Vaizey describes as an “analogue billing system in a digital world.”

The discussion filters into the recent proposals for new advertising rules (here and here), which would force ISPs to provide customers with a single package cost for both broadband and line rental combined (instead of showing them separately). But this rather ignores how the market actually works, with line rental prices generally being reflected via one of three methods or a combination.

Line Rental and Broadband Combinations

1. Broadband and line rental / phone are both sold as separate products, albeit often operating over the same network (i.e. BTOpenreach) and they usually still need each other in order to work. You can often mix each between different ISPs, thus single pricing would NOT work here (hundreds of ISPs offer this).

2. Broadband and line rental (phone) are sold as a bundle from the same ISP (single pricing would work for bundles).

3. Broadband is sold standalone without a phone / line rental service, with the physical line already being part of the main price rather than a separate tacked-on product (most common on pure fibre optic (FTTP/H) services where a traditional separate copper phone line is not required).

The other mistaken assumption appears to be that what the Government proposes might magically result in consumers saving almost the entire cost of the line rental component off their broadband bundle, which is incorrect.

Mr Vaizey said:

“You get these headline prices which are misleading. People should pay for what they use. If the companies come up with a different pricing structure, that is fine, as long as they can see what they are paying for. Some people want to get rid of their landline entirely and pay for their broadband.”

An Ofcom spokesman said:

“Ofcom shares the Government’s concern in this area. We believe prices need to be clearer. Broadband advertising should show the full cost up front, including any set-up fees. So we are working closely with our sister regulator, the Advertising Standards Authority, which expects to make changes in the summer.”

Like it or not, every ISP that uses a fixed line service (broadband, phone etc.) must cover the cost of the underlying physical line (the cable that enters your property) and maintenance in some way. In other words, if line rental is taken out of the equation then the bulk of that cost will simply shift to broadband and you’ll still be paying more or less that same “rip off” price (broadband and line rental are actually quite affordable in the UK, when compared to most other countries).

What the Government proposes might also make life more difficult for the hundreds of smaller ISPs that sell phone and broadband as optional / separate services above (see this feedback from ISPs). An enforced single-price model may actually risk losing choice from the market because not everybody wants to take their broadband and or phone / line rental from the same provider.

Bundles remain a relatively new invention and one that tends to have been most embraced by the bigger ISPs, while the mass of smaller providers (hundreds of them) still sell broadband and phone separately (you can’t force a one price model on these, especially if they don’t even sell line rental).

Ofcom also suggests that the set-up fee should be included into the price, which might require some big changes since the cost of setup often varies depending upon the end-user’s circumstance (migrations are usually much cheaper than costly new line installs etc.). ISPs could of course adopt a shared pricing model (same price for everyone), but that would also mean higher prices (i.e. if everybody pays the same price then migrating customers would effectively be subsidising those who want an expensive new line etc.).

Equally there’s a huge question mark over whether or not the big ISPs would use this type of single pricing as an excuse to quietly get rid of the cheaper Line Rental Saver discount, which is where you can save the equivalent of up to around £2 per month off the line rental cost by pre-paying for a year in advance.

Conclusion

The 2014 Digital Communications Infrastructure Strategy proposal did moot a future in which traditional copper “phone” lines may become a thing of the past (here), with BT further hinting that phone services may eventually take a more VoIP form and be optionally sold over the top of your broadband connection. But that wasn’t expected to happen for another 9-10 years or so.

Lest we not forget the forthcoming Single Order Generic Ethernet Access (SOGEA) product that Openreach are developing (here and here), which is essentially a standalone / naked FTTC (VDSL) “fibre broadband” package that would be sold for a single price.

SOGEA represents a shift in Openreach’s thinking, where you buy the broadband first and the phone service as an add-on (opposite to today’s model). But the “Alpha” trial for this won’t start until October 2016, with a “Beta” trial set to follow in April 2017 and the final Pilot due in August 2017 (commercial launch in 2018?). So it’s a long way off and is currently just one product.

In other words the Government has a huge challenge in trying to fundamentally change how broadband services are sold and it remains to be seen whether or not they can achieve this without inadvertently removing choice and flexibility from the market. In keeping with that they must also make sure to engage smaller ISPs and to understand the technical reality of how such services are sold by suppliers in the first place.

At the end of the day there’s really no reason why ISPs cannot promote their pricing in a clearer way by being more transparent with what they’re doing / discounting. Similarly there is also nothing inherently complicated about line rental, so long as it’s presented and costed clearly alongside the broadband cost when applicable.

We’d love to see an end to confusing offers, but forcing the removal of line rental may have too many unintended consequences and cause frustration when consumers, many of whom hold the mistaken belief that they will save money with its removal, suddenly realise that its cost has simply been transferred to sit under the heading of “broadband“.

In the future we do expect to be buying broadband as the primary product and phone services as an add-on (VoIP), which will reverse the current trend. But as SOGEA shows, Openreach and its ISPs aren’t yet ready to completely make that transition and any new advertising rules must recognise the wider market flexibility and consumer choice.