Fideres Claim Virgin Media and TalkTalk Overcharged for Voice Only Lines

A new study from economic consultancy firm Fideres has accused UK telecoms regulator Ofcom of “tacitly allowing” TalkTalk, Virgin Media (VMO2) and other voice-only landline providers (e.g. SSE) to overcharge consumers by up to £200 million since 2009 (£100m by TT, £50m by VMO2, and a further £50m by smaller providers).

Just to recap. Ofcom’s original 2016/17 review of the associated market (here and here) found that landline-only customers (i.e. those who didn’t take a cheaper broadband bundle) had been “getting poor value for money compared to those who buy bundles of landline, broadband and/or pay-TV services.” The review also found that customer bills for line rental had risen significantly since 2009, while at the same time BT’s costs (wholesale) for providing it had fallen (this ignored the fall in calling volumes that hit related revenues).

The regulator put pressure on BT – home to most of the market’s landline-only customers – to respond. The operator did so in 2018 by voluntarily cutting the line rental charge for c.900,000 vulnerable landline-only customers (reduction of £7 per month), while at the same time capping any subsequent overall increases to line rental and call charges to inflation (here) – this was again extended at the end of 2020 (here).

However, Fideres states that Ofcom allowed other voice-only landline providers, such as TalkTalk, SSE and Virgin Media, to “maintain the same high prices that prevailed before the investigation and before BT’s price reduction.” The consultancy states that, by allowing such providers to maintain prices approximately 60% above the “fair-rate shown by BT’s reduction“, Ofcom may have tacitly allowed them to overcharge consumers.

Chris Pike, Managing Director at Fideres, said:

“Normally, a 37% price reduction by a leading firm would force firms providing the same product to lower prices, but here high barriers to substitution and low consumer engagement seem to have allowed providers to maintain high prices without losing customers. In other words, Talk Talk and Virgin appear to also hold market power over their customers, allowing them to set excessive prices.”

Moreover, these prices disproportionately affect elderly consumers – more than 40% of voice-only landline customers are over 75, and two-thirds are over 65. “These prices may therefore also constitute indirect discrimination under the Equality Act,” added Fideres. However, it’s worth noting that a commercial business is normally free to price its products however it sees fit, albeit usually constrained by the realities of competition.

In addition, back in 2016 Virgin Media did actually respond to this – ahead of Ofcom’s conclusion – by launching a new “Talk Protected” plan that froze line rental (here) for its elderly and disabled customers who rely on their home phone the most (£17.99 per month). Virgin also added special discounts for their calling options.

The research also makes mention of SSE and the Post Office (PO did adopt a similar measure to BT). But we should point out that the Post Office’s base was acquired by Shell Energy in 2021, while SSE’s telecoms base was gobbled up by Ovo Energy, before later being sold off to TalkTalk.

Overall, none of this will be new information to Ofcom’s ears. Indeed, if the regulator had any serious desire to pursue operators over this, then we suspect they would have done so already. In the meantime, the Collective Action on Land Lines (CALL) campaign is continuing to pursue BT in a £600m class action claim (here) related to the alleged overcharging of 2.3 million landline-only phone customers (this relates to the period before BT’s voluntary price cut).