The telecoms regulator has condemned service providers for the packages offered to customers who only have landlines, saying they represented poor value. Ofcom is now planning to make BT, which dominates the telecoms market, to reduce billing by up to £7 each month, which will benefit more than 2 million customers.
Ofcom has examined how the market operates for those who only sign up for a landline, either because they don’t need mobile and office based telephony solutions, VOIP systems, broadband and pay TV, or another company is supplying these.
The watchdog said many of these landline-only customers were elderly and were not getting good value. Currently, the cost of BT landline rental is £18.99 monthly. Ofcom believes this figure should be reduced by between £5 and £7, so these customers would pay £13.99 or even less. Reducing landline rental to £13.99 per month would constitute a saving of more than 25 per cent. This reduction would not be applicable, however, to services purchased in a bundle that possibly included business systems, internet, mobile and office based telephony solutions or VOIP systems.
Of some 2.9 million customers who only have landlines, around 80 per cent are supplied by BT. Ofcom began research into landline costs last December and concluded that Virgin Media and BT were charging the most for landlines, and the next highest charges were from TalkTalk and then Sky. At that point, Virgin Media was launching a scheme to freeze the cost of a landline at £17.99 per month, for disabled and elderly people.
As other networks look to BT as a benchmark for pricing, Ofcom thinks it is likely that other providers will lower their landline charges when BT does. The landline charges review will continue until May, and Ofcom is expected to make a decision sometime in the final months of this year.
The news was welcomed by the opposition government and consumer advocates. Tom Watson, Labour’s minister for culture, media and sport, said it was high time that landline prices were challenged, as providers had put their prices up annually while reaping the benefits of reduced wholesale prices.
Mr Watson said that for many vulnerable and elderly citizens, their landlines were extremely important, along with many low-income households. Fair prices were critical, and the government should step in if necessary to ensure a better deal for customers.
Citizens Advice called for similar moves to be made in other sectors, such as utilities and power. A representative said that customers who were loyal to an electricity, gas or broadband supplier frequently end up paying a lot more for essential services. Instead of being rewarded for their loyal custom, these customers are often penalised with higher bills, as their providers know they are less likely to look around for a better deal.
BT said, however, that the company felt it had serious responsibilities to a number of their customers and supported vulnerable or struggling people with particular tariffs, such as BT Basic. A tariff like this is for people who are perhaps on benefits of some kind and it costs much less than a standard tariff. BT also said that it has recently put a price freeze into effect on landline rental costs for all its customers.