Ofcom’s BT Line Rental Cut is a Headache for Optional Broadband ISPs
Last week’s agreement between BT and Ofcom to drop the provider’s retail line rental price from £18.99 to £11.99 a month for landline-only customers (here), which could soon be adopted by others, may have created an awkward problem for ISPs that still sell optional broadband services.
Some years ago, before broadband and phone bundles became a big thing, it was fairly normal for most consumers to buy their phone line rental and broadband products separately (broadband was essentially an optional add-on that you stuck on top of the line). But gradually the attraction of bundles, which allow consumers to save money by combining several services over a longer contract term, has changed all that.
Nevertheless there are still plenty of ISPs, usually smaller providers, which continue to sell broadband as an optional add-on. In other words the broadband and phone line rental services can be taken from completely different providers, if so desired. However this flexibility faces a challenge from Ofcom’s recent agreement with BT.
The regulator’s decision to cut BT Retail’s phone line rental price for landline-only customers (mostly effecting elderly users that have yet to adopt broadband) is, on the surface, a good pro-consumer call. Part of the reason for that is because the underlying wholesale cost of line rental has actually fallen in recent years while the retail price has surged by between 23% and 47% in real terms.
There are of course many reasons why wholesale and retail prices have diverged so much (e.g. helping to mask rising broadband prices and balancing against a decline in calls / revenues) but we won’t detail them again today. However the competitive market means that it’s still possible to find providers that offer cheap line rental (list) for around £10-12 per month
Despite this, a few ISPs are concerned that the change could result in some of BT’s landline-only customers being discouraged from adding broadband to their line via a different provider. The reason is because a BT customer who attempts do this would find that they are no longer eligible for the line rental discount.
Adrian Kennard, Director of AAISP (Andrews & Arnold), said:
“I am all for competing fairly, really. I fully understand buying separately can cost more, and if we are one part of that then fair enough. I don’t mind competing in bundles. But to make it so that someone buying separately not only has the extra overall cost of doing that, but also gets fined by one of the providers, that is crazy and really seems anticompetitive to me.
We already offer a phone line with no calls for £10 inc VAT per month to support broadband from us. So moving line to us and taking broadband avoids the £7/month price hike, which is good. We don’t try to compete on price, but the bundle does not work out too badly even so. But why should people be effectively forced to move the phone line part. We offer no calls, so people that want incoming calls or occasional outgoing calls will not find what we offer suitable. We do offer a package to move a BT number to VoIP at the same time, which helps address this in part. But we don’t want to force people to move their lines to us if they don’t want to.
If we can tell a customer is on this special tariff when ordering, we’ll add a warning about the BT fine. I doubt we’ll be able to tell though as I don’t think OFCOM really thought this through somehow.”
The regulator’s argument is that the market offers plenty of choice (competition) for those who go looking. Indeed there are several ISPs that offer both broadband and phone line rental together (bundle), often for not much more than if you were to buy just the phone line service on its own. But it does still somewhat work against smaller third-party providers that sell broadband as an optional add-on to a BT phone line.
Ofcom Statement (1.14 and 1.15)
Like voice-only customers, split purchasers have suffered increases in line rental charges in recent years without significant offsetting benefits. However, split purchasers are typically younger and more technologically literate, and, by definition, have internet access which allows them to access alternative offers more easily.
Unlike voice-only customers, split purchasers have a wide range of choices available to them, such as dual-play (telephone and broadband) bundles, which should allow them to seek better value for money from providers if they increase their levels of engagement.
To address the detriment faced by split purchasers we have decided that it is more appropriate to allow time for split purchasers to become more actively engaged and potentially switch to dual-play bundles where that is a better option for them, than to include them in a price control at this stage.
Split purchasers may benefit from being informed that, in many cases, they are not obtaining good value for money and can find themselves a better deal.
At this point only BT has adopted the agreement, although Ofcom has hinted that some of the other big ISPs may follow suit. Once that happens then smaller ISPs offering optional broadband services may feel as if they need to refocus on offering a bundled solution, which in turn could run the risk of reducing rather than expanding consumer choice and flexibility.
On top of that there may also be some grey areas to get around this problem, such as if the customer takes broadband via a 4G Mobile, Fixed Wireless Broadband, shared WiFi, Satellite service or even a completely different fixed line network (e.g. Virgin Media’s cable platform or an FTTP/H ISP like Gigaclear). Not to mention some general issues with existing contract terms and clarity of pricing in product advertising (these should be answered once BT’s new pricing goes live from April 2018).
Few decisions by Ofcom ever seem to result in a neat one-size-fits-all solution where everything works and everybody agrees, which is now somewhat par for the course in this highly competitive market of often complex rules. We can also appreciate that Ofcom tends to focus on the biggest providers (reflecting around 90-95% of consumers), but they sometimes do this to the detriment of smaller players.
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, Google+, Facebook and Linkedin.
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Entirely predictable. Ofcom solving problems by creating new ones. Still it keeps them in employment.
100% in agreement. OFCOM need to justify their existence and as usual the peoples champion have probably cost a lot of people a lot of heartache and money. This is what we are paying our taxes for.
I kind of feel like the real issue is ISP’s subsidising Broadband costs with line rental fees. Something needs to be done about it because, as rightly pointed out, those with landlines only are being penalised.
A BT fine?
Simple answer to all this in my view. Just make it so that BT can only shaft you IF the broadband element is with them. If with any other provider (or indeed no broadband at all) then lower ish-cost based price applies.
This is most probably the best solution and not picked up by Ofcom. We have BT phone only lines and get broadband from elsewhere as the Broadband is on a Business Account while the phones are on a consumer account, so will not be able to benefit from the discount nor are we incentivised to “split purchasers to become more actively engaged and potentially switch to dual-play bundles where that is a better option for them” as Ofcom seems to dictate.
why have a pointless comment from aaisp no one care what they think
You are right obviously everyone cares about your half ass opinion much more.
I am being penalised because I have broadband. I’ve been with BT since1975 but I’m now thinking of changing all my package to virgin and it will cost me less
Shockingly poorly written article.
Thanks for that, I really appreciate such feedback coming from a BT corporate user. As always if you would like to offer some constructive feedback then I’m happy to listen and adapt the content where appropriate. At present though I’m uncertain as to which aspect has been poorly written or if you merely disagree with the point that has been raised.
Wait so “james” is a BT corporate user, yet pretends to be a VM user with problems with the service on near every VM story? Surely not!
“shockingly poorly” – let’s not do that to the English language shall we?
Warning to all those who are eligible
The letter from BT asking you to confirm that you are eligible is misleading in that it states you will not be eligible for the landline £7 orice reduction if you have broadband with BT “” or any other provider “”
The last add-on is clearly meant to mislead older people because the truth is if you have Virgin Media or broadband coming via cable or other methods that is not on the BT landline you are indeed eligible.
This is a shocking dirty trick once again from BT trying to escape the full impact of this cut I’m making people with broadband particularly cable continue to pay the full whack.
Ofcom really need to look into this and fine these greedy gangsters
I have just received this same letter from BT. I agree it is deliberately misleading and fails to clarify “any other provider’ which should read “any other ADSL provider” or similar. OFCOM should really jump on them for this!
I have exactly the same situation – a BT landline and broadband via Virgin cable so not on the BT line I checked with BT and it say I do not qualify for the discount even though ny broadband is not over the phone line. I think this is all down to Ofcom’s poor drafting of its advice to telephone companies which specifically mentions satellite and 4G access but not cable. Ofcom should revise its advice!
Actually, I have just read the OFCOM statement in detail. It would seem that I am defined as an ‘unbundled split purchasers’ and, since I have access to broadband, I do NOT qualify for the BT discount. The OFCOM intention seems to be to help a non ‘tech savvy’ demographic. Hmmm, I shall be cancelling my BT landline as soon as I can port the number across to Virgin.
See OFCOM document at https://www.ofcom.org.uk/__data/assets/pdf_file/0015/107322/standalone-landline-statement.pdf#page=6
I have just received the same ‘eligibility’ letter, have been aware (for a few months) of the upcoming line rental saving and was about to return the coupon but then realised that cable broadband customers are implicitly also excluded from the saving. I have a BT landline and Virgin Media cable for broadband but can’t see what business it is of BT to suggest that I cannot benefit from their saving if I choose to use another broadband service. This follows on from BT’s attempt to get landline only customers to get broadband for ‘free’ a few months ago (so that they would now not be eligible for the saving) – poor show all round BT!
Very poorly written letter from BT that should certainly clarify the detail with regards to eligibility.
The ambiguity is usually a giveaway of essentially trying to mislead some customers who would be eligible for the discount in to not applying for it.
Why would I be surprised though ? – the same BT that were more than happy to be exploiting their most vulnerable customers in the first place and only took the initiative towards change when the government threatened to do it for them.
I have a BTlandline but my broadband is via cable through Virgin so is not through tghe phoneline. Do I qualify for the BT discount? The BT letter doesn’t address this issue