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Ofcom Nudge BT to Slash UK Standalone Monthly Line Rental Costs by £7

Thursday, October 26th, 2017 (8:37 am) - Score 1,939
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Consumers who take a landline-only phone service from BT will, from 1st April 2018, pay £7 per month less for their line rental following a decision by Ofcom (i.e. £11.99 inc. VAT per month instead of £18.99). The move will benefit up to 1 million of the operator’s customers, especially elderly users.

The decision stems from the regulator’s Narrowband Market Review, which last year noted (here) that telephone line rental prices had risen sharply over the past few years (partly to help balance against the rising cost of service provision in other areas (broadband) and lost revenues from voice calls). Ofcom found that in recent years the price has risen by between 23% and 47% in real terms, while the underlying wholesale cost has fallen by c.27%.

line_rental_costs_2015

The regulator noted that customers who purchased bundled services (e.g. broadband, mobile, line rental and or TV) often benefit from big discounts, but sadly this didn’t apply to 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. Nearly two thirds (66%) of customers with only a landline are aged 65+ and more than three quarters (77%) have never switched provider.

Apparently around two thirds of these landline-only customers (there are close to 1.5 million in the whole of the UK) come from BT and many of those take broadband from another ISP, while the remaining million take either BT Basic (social tariff) or Home Phone Saver.

Ofcom’s change means that at least 800,000 of BT’s landline-only customers will benefit from the reduction automatically (they will also be protected from real-term price increases, with line rental and call costs capped at the rate of inflation). A further 200,000 customers on the operator’s ‘Home Phone Saver’ package may also be eligible (i.e. they will be given the option to move to the cheaper service, depending on which is the best deal).

Jonathan Oxley, Ofcom’s Competition Group Director, said:

“For many people, their landline is their lifeline.

But households who only have a landline – and no broadband – have seen their phone bills soar. Many are elderly, and have been with BT for decades. We’ve been clear that they must get a better deal. So I’m pleased BT has responded to our plans in full by cutting these customers’ bills.”

A BT Spokesperson said:

“We welcome a balanced voluntary agreement with Ofcom which means that up to 1m of our customers who don’t have broadband will receive a substantial cut in the price of their line rental from April 2018.

We have listened to the concerns of our line-only customers and agreed to reduce the price of line rental for them by £7 a month, or £84 a year, which means they will only pay £11.99 a month for standard line rental.

This will come in to effect from April 2018 for all landline-only customers who just take phone services from us and don’t have broadband (either with BT or someone else).

We already offer low income customers on certain benefits a special tariff called ‘BT Basic’ and also offer Home Phone Saver that provides a great value bundle for customers who want a traditional phone service, with Anytime calls and other benefits.”

The agreement also requires BT to help those who buy a telephone service from one provider and broadband from another, albeit only by explaining that they could get a better deal if they purchased such services as part of a bundle. The regulator hopes that other operators will now follow BT’s lead, although they aren’t currently required to do so.

The 37% price cut (an annual saving of £84) will no doubt be welcomed by those who stand to benefit, although it’s not uncommon for operators to recoup any losses by increasing their prices in other areas and thus all eyes will be on next year’s annual price hike to see what changes are made (another possible tactic is to bring related price hikes forward by a few months).

Separately, Ofcom’s Narrowband review suggests that “regulation of voice services may no longer be necessary in future. In our next review, it may be possible for us to entirely remove wholesale regulation of lines and calls, if we find that competition is delivering for consumers or because other forms of protection are sufficient or appropriate.”

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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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15 Responses
  1. Avatar Optimist

    This appears to me so wrong.

    If this scheme runs at a loss, who will end up paying for it? If it does not, then why should broadband customers be charged an extra £7 for line rental?

    Won’t the mobile phone providers, which have been very successful in competing with fixed-line providers, complain about anti-competitive pricing?

    If this is being introduced for social reasons, sthen surely the cost should be picked up by the taxpayer, like concessionary bus fares or the winter fuel allowance?

    • Avatar spurple

      The UK is a capitalist economy, No? If so, by all means providers can charge what the market can bear.

      If they bow to regulatory and political pressure and lower prices for a segment of the market, it doesn’t mean that everyone else must get the same deal.

      I am on the side of the fence that won’t see any benefit from this, but I have no qualms with my pensioner neighbours getting cheaper bills.

  2. Avatar Patrick

    Yes, Doesn’t seem right. eg many pay for landline separately even if they have broadband as well. It is a separately billed charge which for BT (or plusnet in my case), I could have paid upfront for a year. If the wholesale cost has dropped. why arent we all getting the benefit?

    • Avatar Ultraspeedy

      “…even if they have broadband as well. It is a separately billed charge which for BT (or plusnet in my case)…”

      BT bill broadband and phone as a single charge.

  3. Avatar George M

    But the FOUR landline only competitors to BT are not being told to reduce their prices. They supply a third of the market (according to the BBC article) at similar pricing to BT.

    So much for price regulation.

    • Ah but do they control the that much of the landline-only market? Many of the rest have been focused upon broadband bundles since almost day one (TalkTalk may be an exception).

    • Avatar Patrick

      According to the BBC website report

      “Ofcom expects three other providers to follow suit.”

    • Avatar Steve Jones

      It seems to me quite possible that at least some of those three other phone-only operators might pull out of the market if they can’t compensate for the loss of revenue by increasing phone charges. The margin over WLR is now less than £2.80 a month (taking VAT out of the equation). That’s before any overheads.

      In effect, this takes about £70 a year out of revenues. I suspect that will just wipe out profits on very many lines.

      It will be interesting to see if the price of phone calls will diverge with voice only users paying more than broadband ones.

  4. Avatar Eccles

    There are other WLR provider out there for those who have line rental purely for broadband, namely AAISP, Freeola, Aquiss and probably some others, that don’t charge over the odds for line rental (and will still be cheaper after the BT price drop). A majority just assume land line = BT or the small providers battle to get their name out there.

  5. Avatar MikeW

    I think this is an essential rebalance between the voice service and broadband service. Seems necessary prior to SOGEA.

    • Avatar Steve Jones

      It’s completely irrelevant to SOGEA as this regulation is a retail price cap being applied only to BT Consumer. In effect, it means that BT consumer will be charging £10 per line per month exc. VAT and will be paying £7.22 (the wholesale cost for WLR) meaning a monthly margin of £2.78. That’s before any other overheads, so very slim, if anything after that’s taken into account. Fixed line voice revenue is on a steady decline – the whole voice-only market is ceasing to exist and it’s turning into a social service.

      As far as SOGEA is concerned, the relevant costs are MPF and SLU, and I do not expect to see a substantial difference between the two emerging or it would create an enormous potential whole in OR cost recovery. After all, the fibre connections still use the passive infrastructure.

    • Avatar MikeW

      I don’t expect to see naked SOGEA being priced much differently from today’s broadband products, either.

      But a low differential there implies there isn’t much value in a “naked voice circuit” – so would highlight that plain line rental on voice circuits ought to drop. As is now happening.

      As it happens, I think this is stage 2 in a sequence of changes prior to SOGEA, where the first step was to get unified bundle prices that included line rental.

      And I’m undecided about how we’ll see SOGEA marketed at first. I think there’s at least a 50% chance we’ll see it sold as a bundle alongside a VoNGA-style voice product (or FVA for FTTC), rather than just as a naked DSL.

  6. Avatar The Archbishop

    The key here is actually the broadband pricing – for the last few years the ISP’s have offered aggressive price promotion on the broadband component, which they’ve subsidised by inflating line rental prices. When Ofcom/ASA forced ISP’s to quote a combined bundle price about a year ago, this became hidden in one total cost.

    Forcing down the price of the line rental component is unlikely to make much difference to the bundled charge for broadband with line rental – the ISP’s will need to get their money back still, so the overall price of a bundled broadband/line rental will probably not change.

    • Avatar Steve Jones

      This regulation does not apply to bundles including voice and broadband.

    • Avatar MikeW

      Indeed. What this regulation says is that real line rental is £7 cheaper than ISPs have been telling you, but leaves unstated that broadband is really £7 more expensive than ISPs were telling you.

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