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.