Ofcom Force BT to Cut UK Standalone Line Rental Costs by “at least” £5

The United Kingdom’s national telecoms regulator has told BT to slash the cost of their line rental service by “at least” £5 per month for landline-only customers, which would affect more than 2 million of the operators’ customers (i.e. those who don’t take line rental as part of a BT Broadband bundle).

At the end of last year Ofcom announced a review of telephone line rental prices (here), which have risen sharply over the past few years (partly to help balance against the rising cost of service provision in other areas (e.g. broadband) and lost revenues elsewhere). In recent years the price has risen by between 25% and 49% in real terms, while the underlying wholesale cost has fallen by around 25%.

However the regulator notes that customers who buy bundled services (e.g. broadband, mobile, line rental and or TV) often benefit from big discounts, although the same cannot be said for those who buy landline services on their own. This is often “felt most acutely” by elderly and vulnerable people who tend to shun bundles and stick with the same provider / standalone line rental product for years.

On average, landline-only customers have been with their provider for more than 20 years, compared to 8 years for phone with broadband customers, and 4 years for triple-play customers. Some 43% of customers with a standalone landline contract are aged 75+ and almost 80% (2.3 million) of the UK’s 2.9 million landline-only customers are with BT (we note that around 1 million of those take broadband from another ISP and of the remaining customers, the majority take either BT Basic or Home Phone Saver).

Sharon White, Ofcom CEO, said:

“Line rental has been going up, even as providers’ costs come down. This hurts people who rely on their landline the most, and are less likely to shop around for a better deal. We think that’s unacceptable.

So we plan to cut BT’s charge for customers who take only a landline, to ensure that vulnerable customers get the value they deserve.”

Ofcom found that BT’s “market power has allowed it to increase prices without much risk of losing customers” and other providers (e.g. Sky Broadband, Virgin Media, TalkTalk, Plusnet etc.) have then followed BT’s pricing lead by raising their own charges at a similar rate, which has become somewhat of an annual tradition. However only BT and Virgin Media already offer a cheaper social tariff (here and here).

The regulator’s solution is thus to introduce an additional protection, which will force BT to cut the cost of their line rental service by at least £5 per month (£60 per year); although they’re also consulting on a figure as high as £7 per month.

In practical terms Ofcom states that the £5 reduction would effectively return the cost of line rental to “2009 levels” and see the current monthly charge of £18.99 being slashed by -26% to just £13.99, although we’re not so sure about the 2009 remark because we recall it being about £12.50 in that year. Perhaps 2011 is closer.

BTs Line Rental Price History inc. VAT
2011 = £13.90
2012 = £14.60 (+5.04%)
2013 = £15.45 (+5.82%)
2014 = £15.99 (+3.5%)
2015 (Dec 2014) = £16.99 (+6.25%)
2016 (Sep 2015) = £17.99 (+5.89%)
2016/17 (Apr 2016) = £18.99 (+5.56%)

The planned price cut would NOT apply to landline services sold by BT Consumer as part of a bundle of services including broadband. In addition, Ofcom are proposing “safeguards” to “prevent BT from making future increases to line rental and landline call costs by more than inflation” (these safeguards would cover the line rental, call charges and the call package add-ons).

On top of that Ofcom are proposing to set a revised price for BT’s annual pre-paid line rental saver discount, which currently costs £205.08 (i.e. equivalent to £17.09 per month). Customers would get 10% off the annual cost of the new lower-price line-rental decided by Ofcom (e.g. should they reduce BT’s line rental to £13.99 per month, the annual pre-paid cost to customers would become £167.88 and with a 10% discount that’s £151.09).

Ofcom hopes that other operators would then follow BT’s lead, although at present the rule change will only be forced upon BT. However there’s a risk that BT may simply try to compensate for the lost revenue by taking it from elsewhere in their product chain, which for example could perhaps result in price hikes for those who take their broadband bundles. Consumers may also face some additional price confusion if the line rental costs differ between standalone, broadband bundles and pre-paid discounts.

A BT Spokesperson told ISPreview.co.uk:

“We will respond to Ofcom’s consultation fully when we have considered the detail. We take our responsibilities in this area very seriously and, unlike other companies, have many customers on special tariffs for socially excluded or vulnerable customers, including BT Basic, which still costs just £5.10 a month for line rental and calls, and Home Phone Saver.

Recently, we have frozen the cost of line rental for all of our customers who take a BT phone line. We have also been improving the service we provide and customers have benefitted from our multi-million pound investments in a faster fault repair service, the launch of our free nuisance calls prevention service BT Call Protect and bringing call centre work back from India to the UK.”

We’re also trying to confirm what impact this might have on consumers who only buy their line rental from BT, while taking broadband from a separate ISP and putting it on the same line. Ofcom’s wording suggests that the no-bundles rule only applies to BT Consumer and not third-party broadband connections on the same line. We are double checking this to clarify and will update shortly.

Otherwise Ofcom’s related consultation on these proposals will be open for responses until 9th May 2017 (here).

UPDATE 28th Feb 2017

Ofcom informs us that the proposed price cut would apply to all BT Consumer customers with standalone landline-only contracts, including customers who buy broadband from BT or “another provider under a separate contract“. This will certainly encourage some interesting changes in the market.

UPDATE 28th Feb 2017 @ 9:43am

Added a comment from BT above.