Are Rising Land-Line Rental Charges in the UK Justified?
With mobile penetration in the UK close to 100 percent, more and more households have been cutting cords into the house. Currently one in five UK households do not make fixed-line calls, but are nonetheless required to pay for land-line connections to receive broadband Internet access.
Now, under new proposals to be put forward by Ed Vaizey, the Minister for Culture, Media and Sport, broadband users could be exempt from fixed-line rental charges if they do not make fixed-line calls. Mr Vaizey has requested a meeting with BT, TalkTalk, Virgin Media and Sky to discuss eliminating the charges to homeowners for land lines they do not use. Providers could instead introduce new pricing structures more closely aligned with the services customers are actually using. This may result in price increases elsewhere, but also ensure greater transparency.
Like in many developed markets, land-line usage has been dropping during recent years in the UK. Data from regulator Ofcom shows that outgoing land-line call volumes fell by an average of 12.5 percent each year between 2004 and 2014, including dial-up Internet usage. Yet the line rental charges have been increasing. Falling call volumes have prompted operators to rebalance their tariffs to recover the shortfalls. They have largely done this by raising line rental prices. Indeed, data from Ofcom shows line rental charges by the major providers has risen by an average of more than 25 percent in real terms since 2010.
Land-line charges vary slightly between providers, but many use the same BT-owned lines, incurring BT’s wholesale rental charge, which is passed on to customers. This sets a baseline for charges, meaning that, for example, monthly line-rental charges for Sky are currently about £17.40; TalkTalk charges about £17.70; and BT’s consumer rental charge is around £17.99. The prices have all increased an average of £1 from the previous year. Some providers offer cut-price rental to entice subscribers to switch — in November 2015, TalkTalk launched a half-price rental scheme for customers signing an 18-month contract.
As part of its review of telecommunications in the UK, Ofcom recommended changes to the near-monopoly on infrastructure enjoyed by BT’s Openreach arm. The heated opposition to Openreach by BT’s rivals may have sparked the government to look at ways of decoupling broadband charges from a line rental system that predates the Internet.
In the plan proposed by Mr Vaizey’s department and seconded by Ofcom, households signing up for broadband packages could be exempt from the rental charge on their landline, paying only for the service used. In a separate move, the Advertising Standards Authority has announced that Ofcom will release new guidelines covering how broadband packages should be marketed. The rules, which will be introduced in May, aim to make pricing clearer and easier to understand. Removal of the rental fee would only help this goal. With greater transparency and flexibility on the horizon, consumers — and possibly network operators — should have cause for celebration.
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