BT customers who buy only a landline telephone service will see their monthly bills slashed by £7 per month, following an Ofcom review.
This represents a saving of £84 a year, or 37%, for up to one million of BT’s landline-only customers.
They have been getting poor value for money in recent years, compared to those who buy bundles of landline, broadband and/or pay-TV services. Nearly two thirds (66%) of customers with only a landline are over 65, and more than three quarters (77%) have never switched provider.
Ofcom has been concerned that telephone line rental prices have risen, despite wholesale costs falling. 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.
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.
If BT fails to honour its agreement, Ofcom will step in.
Jonathan Oxley, Ofcom’s Competition Group Director, said: “For many people, their landline is their lifeline.
“But 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. So I’m pleased BT has responded to our plans in full by cutting these customers’ bills.”
Telecoms providers must continue to up their game on service quality and too many customers still experience problems. But on the whole, customers who buy communications services in a bundle are getting more for their money, thanks to strong competition in the market. By contrast, landline-only customers have less choice, with a number of providers having withdrawn these products altogether.
Our analysis shows that all major landline providers have increased their line rental charges significantly in recent years – by between 23% and 47% in real terms. This is despite providers benefitting from around a 27% fall in the underlying wholesale cost of providing the service.
Of the UK’s 1.5 million landline-only customers, two thirds are with BT. This position has allowed BT to increase prices without much risk of losing customers, and other providers have followed BT’s pricing lead. We expect BT’s £7 price cut to mean other providers can follow suit.
Ofcom also wants to help people who buy a telephone service from one provider and broadband from another.
While the price cut will not apply to this group, the agreement requires BT to help these customers take advantage of the deals on offer in the market, by explaining that they could get a better deal if they purchased services as part of a bundle.
Separately, Ofcom is examining measures to help people shop around with more confidence, so they can take full advantage of the wide choice of competitive services.
We will continue to keep a close eye on the market, to ensure BT’s actions address the problems we have identified. If we have any concerns about consumers or competition, we will consider the need for further intervention.
Addressing landline prices is the latest in a series of measures by Ofcom to help telecoms customers. We are also ensuring that people and businesses get better information on broadband speeds before entering a contract; and strengthening the general rules that all providers must follow.
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