Former UK state monopoly BT has agreed to Ofcom's requests to hack more than a third off the price of monthly line rental for its one million landline-only punters across the UK.
Even though wholesale costs of providing landlines had fallen, rental prices had risen, pointed out Ofcom, which said it was concerned that landline-only customers were getting "poor value for money" relative to households that sign up for bundles (landline, broadband and or pay-TV services).
From the start of April, the monthly cost will drop by £7 from the £18.99 currently charged, and future line rental and call cost rises will be capped at the rate of inflation, the comms watchdog confirmed.
Some 66 per cent of customers in the landline-only group are 65 and over, and 77 per cent haven’t switched providers. “For many people, their landline is their lifeline,” said Ofcom competition group director Jonathan Oxley.
“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,” he added.
Some 800,000 landline-only customers will automatically receive the 37 per cent price reduction, and the other 200,000 on BT’s Home Phone Saver pack can stay on the current plan or move to the standard product that is being cut, depending on which is cheaper.
“If BT fails to honour its agreement, Ofcom will step in,” the watchdog threatened.
Fierce competition for broadband bundles meant consumers are getting more for their money but the opposite is true in the line rental space after a number of providers including TalkTalk Sky and Virgin Media stopped marketing their products, leaving less awareness that there was a choice.
Major landline providers had increased prices between 23 to 47 per cent in recent years, even though underlying wholesale costs of service provision had fallen 27 per cent.
Some two-thirds of the 1.5 million UK landline-only customers are with BT, meaning the firm was able to lift prices "without much risk of losing customers, and other providers have followed BT's pricing lead," said Ofcom.
"We expect BT’s £7 price cut to mean other providers can follow suit," the watchdog added.
In a separate review, Ofcom is probing ways to help consumers shop around "with more confidence" and have "better information" on broadband speeds and bundles before entering a contract.
BT told The Reg:
We welcome a balanced voluntary agreement with Ofcom which means that up to 1m of our customers who don’t have broadband will receive a substantial cut in the price of their line rental from April 2018.
We have listened to the concerns of our line-only customers and agreed to reduce the price of line rental for them by £7 a month, or £84 a year, which means they will only pay £11.99 a month for standard line rental.
This will come in to effect from April 2018 for all landline-only customers who just take phone services from us and don’t have broadband (either with BT or someone else).
We already offer low income customers on certain benefits a special tariff called ‘BT Basic’ and also offer Home Phone Saver that provides a great value bundle for customers who want a traditional phone service, with Anytime calls and other benefits.