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

Tuesday, March 22nd, 2016 (7:44 am) - Score 5,563
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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 The discussion will focus on how to kill off the “outdated” system of line rental charges, which Vaizey describes as an “analogue billing system in a digital world.”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.

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Mark Jackson
By Mark Jackson
Mark is a professional technology writer, IT consultant and computer engineer from Dorset (England), he also founded ISPreview in 1999 and enjoys analysing the latest telecoms and broadband developments. Find me on Twitter, , Facebook and Linkedin.
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20 Responses
  1. Avatar DTMark

    There’s another important aspect to this regarding bundled services and it is one of contract. Or, multiple contracts.

    You sign up for broadband and get a speed estimate. The speed falls short. You therefore want to cancel. The OFCOM speed code is vague at best about what is required for you to cancel. And even then you can’t get a refund.

    But the more significant issue is that of the provider attempting to hold you to the contract for the line rental even though you never wanted a “phone line” in the first place. “Yes, we know we can’t deliver you anything like we said we could/would, so we’ve let you down, but we still expect you to keep paying us for absolutely nothing useful for 12+ months”.

    This then becomes more complex if you took a TV service too, which needs the broadband to work, which needs the line rental to work.

    Hopefully the issues surrounding bundles and multiple contracts can be examined too.

  2. Avatar 3G Infinity

    … and BT will not, in its current guise roll over and let a ‘naked DSL’ product be forced upon it by Government.

    • SOGEA is meant as an additional product, rather than something that is being forced across the board and I think that’s what 3G Infinity is getting at. But I doubt Openreach will be forced to do anything, as usual it will be the ISPs that have to carry the burden of implementation based on existing systems / products.

    • Avatar MikeW

      I view SOGEA slightly differently, but it does still end up with a product variant that can be sold as naked DSL.

      I see SOGEA as the first way that allows BTW/Openreach to treat broadband as the primary orderable product, compared to today, where it is always a secondary product attached to a voice product. If voice is cancelled, the broadband goes with it too.

      This triggers a system-wide rethink of all the existing processes within BT and between the CPs and BT themselves. We can see that BT have a lot of internal system updates coming through for SOGEA, where orders can be placed, faults reported, tests run, results returned to CP’s, migrations from voice-primary to data-primary and vice-versa.

      Sneaky, of course, that it will only apply to GEA-based products, and not exchange-based ones.

    • Avatar Steve Jones

      It’s perfectly possible for an LLU operator to implement a naked DSL service. MPF is just a raw metal pair, albeit with some exchange-based diagnostics. That ISPs continue to include a voice service is just a way of gathering a bit more revenue. The cost of actually providing the voice service to an LLU operator is pretty well zero as the same MSAN that provides ADSL also does the voice service.

      Those who are expecting a lower bill for broadband alone are likely to be disappointed. Any savings will be marginal, and without any call revenues BB alone might even cost more.

    • Avatar Steve Jones

      @Mark Jackson

      “But I doubt Openreach will be forced to do anything, as usual it will be the ISPs that have to carry the burden of implementation based on existing systems / products.”

      Perhaps you’ll expand on this, as I’ve no idea what you are trying to say. If it is that ISPs will have to do some work to integrated with the wholesale interface, define new customer products, handle different configurations well then yes. But you seem to be suggesting that there was some other way that OR could have done this so ISPs wouldn’t have to “carry the burden of implementation based on existing systems/products”. Personally I’m at a complete loss as to how that could be avoided, but the implication is that Openreach could have been forced to do something to avoid this.

      Of course it may be that the new wholesale interface has been designed in an overly complex manner, but that’s a different matter. In any event, a product like this clearly changes a lot of the assumptions that may have been built into systems and data models, but I don’t see how that can be avoided.

    • It means ISPs will probably still be buying the same products from Openreach as they did before, with all the separate caveats and complications to each connectivity solution involved, but the Government may only pressure ISPs to adjust and not Openreach to change their products to accommodate simplified single pricing via new solutions etc. SOGEA is still a long way off and it won’t do much for ADSL bundles etc.

      But it’s pointless to argue details Steve when we don’t even know what the Government will do yet, we’ve only heard the public spin. They might not go as far as we expect they could, especially if the ISPs drum a little common sense into their position.

    • Avatar Steve Jones

      It’s a bit difficult to see what OR could do. It’s possible to imagine a broadband-only version of WLR, although there’s the little problem that exchange-based ADSL is a BTW, not OR product, but I’m sure that could be dealt with.

      In the case of LLU ISPs, then none of this is in the OR domain anyway. The LLU ISPs could sell a BB-only service if they wished using exchange-based ADSL. It won’t be any cheaper for them, but they could do it.

      Really I think this is down to the way retail service providers present their products. I don’t really see there’s much OR can do about it save the possibility of a BB only ADSL service (which really wouldn’t be much difference in price).

      In any event, if there was no voice service to help defray the costs, the price of the BB-only product would no doubt be higher (as happens with operators like PlusNet, where BB is a bit cheaper if you take the voice service from them).

  3. Avatar Ethel Prunehat

    > line rental charges, which Vaizey describes as an
    > “analogue billing system in a digital world.”

    Urgh, politicians. Nice soundbite but utterly free of any technical meaning whatsoever.

  4. Avatar sentup.custard

    If you use l-a-n-d-l-i-n-e broadband then (surprise, surprise) you need a l-a-n-d-l-i-n-e, so one way or another, of course you’ll pay for it. The only real issue here is the way some of the big ISPs mislead people as to the *total* cost in their advertising.

  5. Avatar mrpops2ko

    Great change in my opinion. I’d much rather see one final figure for everything I wanted and I only want VDSL. Then its much much easier to compare prices, rather than having to use a variety of different price comparison websites to work out which would be better for me in the long run.

    So many of them do some deals in order to hide the overall price you pay so you never really know what the final figure will be. Some do this 6 months half price, half price for a year – some have much steeper prices after the initial period, some have initial free periods. I just want the final figure at the end of the month / year / contract so I can see which would be cheapest. I want the bottom line figure and I shouldn’t have to jump through hoops in order to find it.

  6. Avatar gerarda

    It appears the chickens are coming home to roost. If landline rentals had not shot up so that the broadband element could be given a cheap headline figure there would not be the same pressure to get rid of them.

    • Avatar Darren

      Exactly. The ISPs will have no one but themselves to blame for this if forced through. There was no need to include broadband cost in line rental over the last few years. It has made costs hugely confusing comparing between suppliers. If I was in charge at OFCOM, I would force Openreach to make it easier for smaller broadband suppliers to supply lines in addition to broadband. Then end the practice of separate line rental from different suppliers. I know it would inconvenience some, but I’m sure it would aid far far more in avoiding cost confusion.

    • Avatar FibreFred

      No sorry this will make no difference at all.

      I’ll advised and incompetant words from the Government but then.. what do we expect?

      Should people pay for a voice service when all they want is broadband? – Of course not

      Will it make things much cheaper? – Of course not

      I expect the savings will be swallowed up by the next price increase anyway.

    • Avatar MikeW

      I’m with all 3 of you on this.

      This is old marketing coming home to roost: the idea of “free”. It started with Freeserve giving the UK public the appearance that internet access was free. The UK only overtook Germany (in terms of takeup) once the service appeared free. This concept continued with TT trying to under-do everyone in the race for the bottom of free broadband too.

      We’ve had great takeup figures as a result of making broadband appear to be free, but it appears that it is no longer palatable for this false state of affairs (that was always false) to continue.

      Hopefully the change will make comparisons easy … but I expect the marketers will find ways to make it complicated. Anything to reduce churn and increase ARPU.

      Do I expect it to make things cheaper for anyone? Not at all; not yet.

      As our concept of a voice service switches from the primary product, to being a secondary one carried over/alongside the primary data product, BT have to figure out a way to migrate. That migration involves a technical side (from System X to a Softswitch-style solution), and a scale one (scaling up the dimensions of the softswitch, housed in data centres, as the System X usage diminishes, in local exchanges), and a billing one (how to get people to pay).

      That migration is going to produce an interesting schism for the masses over the next decade.

    • Avatar Steve Jones

      @Darren

      It’s already easy for small operators to supply lines (if by that you mean voice lines). That’s what WLR does, which is barely any more expensive than MPF. However, it means the ISP has to deal with all the voice support, billing and related customer support systems. It’s whether they consider it worthwhile. There are a number of smaller ISPs that do it already.

  7. Avatar shareen

    Yes WE want Shot Of line rental As it forced onto you what you don’t want plus these contracts what you don’t sign up for want scrapping also as if the isp,s cant give the speed they say then you should be able to leave without charge but the so called isp rip you off as usual a termination fee and remainder of the months . ripoff Britain

  8. Avatar cyclope

    All what is really needed is for those big ISP’s who actively push bundling should have to show the total price for that bundle, and a breakdown of what each part of the bundle costs, contract lengths could be be changed to suit, so all services have the same min terms

    Ed vaizey and the buffoons in the government need to stop meddling with things that they know nothing about

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