BT’s decision to cut monthly line rental price by £7 follows Ofcom’s review and strong instruction to the top operator to slash the price of landphone charges for its customers who take only a landline from BT.
The savings will be £84 per year, or 37 percent, for up to one million of BT’s landline-only customers from April 2018.
Since BT owns two thirds of the UK’s 1.5 million landline-only customers, the telecom operator used its near monopoly to increase prices without losing customers, and other providers have followed BT’s pricing lead.
UK’s telecom industry is now watching for the response from BT rivals after BT’s decision to cut monthly line rental price by £7.
Ofcom said BT’s landline-only customers are getting poor value for money, compared to those who buy bundles of landline, broadband and/or pay-TV services.
Ofcom noted that the monthly price of telephone line rental in the UK telecom market has increased, despite drop in wholesale costs. “Following a review of this market, we set out firm proposals to cut monthly bills for BT’s landline-only customers by between £5 and £7,” Ofcom said.
The telecom regulator said around 800,000 of these landline-only customers don’t have to do anything to claim this price cut – it will appear on their bills automatically. They will then be protected from real-term price increases, with line rental and call costs capped at the rate of inflation.
A further 200,000 customers on BT’s ‘Home Phone Saver’ package will also be eligible. This group of customers can choose to stay on their current package, or move to the standard product being cut, depending on which is the best deal for them.
“Households who only have a landline – and no broadband – have seen their phone bills soar. Many are elderly, and have been with BT for decades. We’ve been clear that they must get a better deal,” Jonathan Oxley, Ofcom’s Competition Group Director said.
Ofcom analysis shows that major landline providers increased their line rental charges significantly in recent years – by between 23 percent and 47 percent in real terms. This is despite providers benefitting from around a 27 percent fall in the underlying wholesale cost of providing the service.
Under the agreement, BT cannot raise its line rental for landline-only customers before the price cut comes into effect in April next year. The agreed price cut will apply for three years from 1 April 2018, and during this period average prices for line rental, calls and ancillary services will be capped to inflation.