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19|07|06

Ofcom removes retail price controls on BT line rental and calls

Today, 22 years after retail price controls were first imposed to limit increases in the price of line rental and calls for BT customers, Ofcom announced their removal.

This significant deregulation follows both the conclusion of Ofcom’s Strategic Review of Telecommunications in September 2005 and a specific public consultation on the removal of retail price controls begun in March 2006.

The removal of retail price controls is enabled by – and reflects – the rapid growth of competition and continued reductions in the cost of phone services for customers. More than 10.7 million households and small businesses now use providers other than BT Group plc for their phone calls – including more than 4.6 million cable customers – and the UK has some of the cheapest phone costs in the world.

This pattern of increasing competition and falling prices is likely to gather pace in the future as new technologies enter the mass market, such as Voice over IP (VoIP) phone calls over the internet, already actively used by more than 500,000 UK households and small businesses. A number of companies have also developed unbundled local loop services which offer phone calls, high-speed broadband, television over broadband and video-on-demand over their customers’ existing phone lines. To date, more than 600,000 local loops have been unbundled, a total increasing by almost 100,000 a month with a further acceleration in predicted demand in the near term.

Fixed line providers also face growing competition from the mobile sector. Mobile phone usage is growing as consumers increasingly turn to mobiles rather than landline phones for many of their daily calls. Mobile phones now account for 31% of all voice call minutes in the UK, up from 20% in 2001 and 5% in 1996.

From 1st August, it’s your call

The current retail price controls, put in place in June 2002, will lapse on 31 July. These changes will therefore come into effect from 1 August. A public information campaign, managed by Ofcom and funded by BT with a contribution from Ofcom, will begin on 20 July with national and regional newspaper and national poster advertisements. The public information campaign will continue through the summer and into the autumn, with further newspaper, magazine and outdoor advertising as well as an online campaign. Additionally, BT will include a letter from Ofcom in all customer bills posted over the summer.

The information campaign will seek to make consumers aware of this change and encourage them to understand the choices available in the competitive market. Images of the first newspaper and outdoor advertisements can be found online - see Related Items.

Continuing protection

BT Group plc has also given a number of assurances to offer additional protection for customers on low incomes and vulnerable groups. The company has agreed it will limit increases to its charges for its basic line rental product to a certain level to avoid disadvantaging customers for whom the line rental accounts for the overwhelming majority of their phone bill.

Those assurances are in addition to the Universal Service Obligations which BT Group plc must meet. Those obligations require BT to provide a telephone line upon request to people in all parts of the UK; they also stipulate that vulnerable groups should have access to special services and tariffs.

Ofcom Chief Executive Stephen Carter said: “The success of regulation is rarely measured by the ability to remove it. This is a good example of a market now functioning well.”

He added: “This deregulation is accompanied by appropriate and specific protections for vulnerable groups.”

The full Statement can be found on the Ofcom website - see Related Items.

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