Ofcom as part of its landline review has decided that BT Consumer has significant market power for standalone landline services and is planning to force the consumer arm to reduce its line rental price by £5 to £7 per month for those who don't also have a BT Consumer broadband service.
"Line rental has been going up, even as providers’ costs come down. This hurts people who rely on their landline the most, and are less likely to shop around for a better deal. We think that’s unacceptable.>
So we plan to cut BT’s charge for customers who take only a landline, to ensure that vulnerable customers get the value they deserve.Sharon White, Ofcom Chief Executive
This is not written in stone just yet, as the plan has to go out to consultation and one can envisage that while BT Consumer does have the lions share of the standalone market, those smaller providers who have always undercut BT Consumer by £3 to £5 month may have something to say if they are suddenly competing against BT Consumer standalone line rental at £13.99 per month, it is conceivable that some of low cost standalone line rental providers may exit the market increasing the dominance of BT Consumer. The proposals also apply to those who take a voice only service and make use of line rental saver.
Ofcom is holding out the hope that by forcing the hand of BT Consumer that its competitors will follow suit, in a similar way to how many of them have tracked the price rises in line rental for the last few years.
Future price rises to recover the cost of this price cut are guarded against for landline only customers by requiring BT Consumer to keep any price rises below the Consumer Price Index and this covers line rental, call charges and the call package add-ons. Though it is not clear if those taking a broadband and line bundle from BT get the same call protections, so the millions of reduced revenue might be recovered by increasing bundle prices.
Essentially this is correcting the perceived failure of the decade old LLU revolution to service the voice only segment of the market. The number taking a landline only service is some 2.9 million households.
So what about those who take voice line rental from BT Consumer and broadband from another provider (i.e. WLR3 and SMPF broadband) well it appears that this market of 1.2 million (part of the over 2.9 million households - change is limited to residential services) will also benefit.
There is now a consultation period running until 9th May 2017 and this means don't expect any price cuts soon.
A price cut of £5 in BT Consumer line rental might see more people taking line rental as a standalone product when chasing the cheapest combinations of broadband and phone, but there is also the real chance that at a time when the Government is trying to encourage more people to make use of broadband to make running public services cheaper that a wider gap in the cost of a phone line and then a phone/broadband package will discourage people from buying fixed line broadband.