Ofcom to cut BT's landline prices, customers to save 26%
Staff Writer |
More than two million people who buy only a landline telephone service from BT would see their monthly bills cut by at least £5 per month, under plans announced by Ofcom.
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Ofcom has reviewed how the market is working for customers who buy only a landline service from a provider – either because they do not want broadband or pay TV, or because they take these services under separate contracts, usually from different companies.
Ofcom found that these customers – often elderly or vulnerable people who have remained with the same landline provider for decades – are getting poor value for money in a market that is not serving them well enough.
Landline-only customers are particularly affected by price hikes in telephone line rental.
Major providers have increased their line rental charges significantly in recent years – by between 25% and 49% in real terms. This is despite providers benefiting from around a 26% fall in the underlying wholesale cost of providing a landline service (see chart).
So Ofcom intends to give customers with standalone landline contracts additional protection by cutting the cost of BT’s line rental by at least £5 per month – or £60 per year.
This would mean that BT customers with only a landline, who currently pay £18.99 per month for line rental, would pay no more than £13.99 – a reduction of at least 26%.
The cut would return the cost of line rental to 2009 levels in real terms, effectively reversing price hikes for landline-only customers.
Customers of ‘bundled’ services – packages including landline, broadband and/or pay TV – benefit from a range of attractive deals, driven by strong competition.
By contrast, offers for landline-only customers have become increasingly limited, with a number of providers withdrawing their telephone-only products altogether.
Almost 80% (2.3m) of the UK’s 2.9m landline-only customers are with BT. Ofcom has found that BT’s market power has allowed it to increase prices without much risk of losing customers. Other providers have then followed BT’s pricing lead.
Ofcom expects that its proposed cut in BT’s prices would lead to other providers following suit and reducing theirs. This would mean savings for landline-only customers across the market. ■