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Ofcom plans to return landline rental charges to 2009 levels

by Mark Tyson on 28 February 2017, 12:31

Tags: Ofcom, British Telecom (LON:BT.A)

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Today Ofcom has announced plans to cut the BT bills paid by those who have standalone landline rental contracts. The regulatory body reckons that many such landline-only customers are the elderly or vulnerable, who have never changed telecoms providers and are unlikely to switch. Under the proposed changes BT would have to slash its landline-only rental charges by at least £5, from £18.99 to £13.99, to bring charges down to approx 2009 levels. BT and other landline providers have pumped up the rental charges by between 25 and 49 per cent in real terms during the last decade, despite the underlying wholesale cost of providing a landline service dropping by 26 per cent.

Typical landline-only rental customers

"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," said Sharon White, Ofcom Chief Executive. "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."

Graph shows cartel style market behaviour?

It seems like landline-only customers are simply missing out on the competition in the telecoms market which is mainly driven by bundled service buyers. These buyers are more likely to switch and are more price sensitive. Ofcom found that on average, landline-only customers have been with their provider for more than 20 years, compared to eight years for phone with broadband customers, and four years for triple-play customers.

A significant number of people will be affected by this Ofcom plan. There are about 2.9 million land-line only households in the UK, with 80 per cent of them (2.3 million) with BT. Ofcom said that BT's power and dominance is such that it could increase prices bit by bit "without much risk of losing customers," inspiring others to do the same. Hopefully with the £5 to £7 BT cut, landline-only customers with other providers will benefit from similar price cuts.



HEXUS Forums :: 20 Comments

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I bet there will be a 5-7 ukp hike in BB wholesale prices at the same time…..
Why are OFCOM only applying this to users with just a land line. Surely the whole argument for line rental is that there is a fixed cost to providing the line regardless of what it is used for?
spacein_vader
Why are OFCOM only applying this to users with just a land line. Surely the whole argument for line rental is that there is a fixed cost to providing the line regardless of what it is used for?
line rental is the universal charge that we can't get out of if we have that line, it's included in the package deals and even resellers have to pay that to bt… yeah aren't monopolies great…

To be honest it's about time they did somethign about the cost, the prices have been going up a lot of late to compensate for their expenses such as buying tv shows (which I don't have or want from them) and finally do what they should have been doing a decade earlier and upgrading our telephone infrastructure, which they then put the cost onto the consumer rather than it cutting into their profits… all of which has been allowed by ofcom.

Mind you, nothing has actually happened yet as this is still going through the ‘talks’ with BT so I can see this being watered down to the bare minimum number of people they can get away with… so people on benefits, ie the work shy (yes I know there are some valid job seekers but they won't get it) and pensioners (who I personally feel should get it for free anyway)
spacein_vader
Why are OFCOM only applying this to users with just a land line. …

The underlying implicit suggestion is that line rental prices have been artificially inflated to support headline grabbing reductions to the cost of other bundled services (like “free” broadband). People who only have a landline are paying higher line rentals to support price cuts in services they don't use.
LSG501
the prices have been going up a lot of late to compensate for their expenses such as buying tv shows (which I don't have or want from them) and finally do what they should have been doing a decade earlier and upgrading our telephone infrastructure

You're muddling up BT Wholesale (infrastructure) with BT Consumer (broadband and phone lines). BT Consumer rent lines off BT wholesale just like any other company. BT Wholesale don't pay for sports out of their money pot.