Ofcom: cost of line rental up 44% yet wholesale costs plunge 21%
Elderly and low income households are biggest victims of this worrying trend.
The cost of household phone line rental has surged over the past five years despite wholesale costs plummeting, according to a new report from regulator Ofcom.
Since December 2010 Sky has steadily hiked line rental costs by 44.1%, while Virgin Media has put costs up by 33.9%, Talk Talk by 33.1% and BT by 23.3%.
However, the regulator says over the same period wholesale prices have fallen by up to 21.3% for some providers.
The price rises are blamed on the falling number of people using just a fixed phone line, with the focus of competition shifting towards those that take broadband out as well.
Impact
Ofcom says the greatest impact of this trend was likely to be particularly felt by the elderly and other vulnerable customers on low incomes.
That’s because they are more likely to rely on a fixed line phone rather than a mobile or broadband line for contacting others and they are also less likely to shop around for a better deal.
The Ofcom report revealed 45% of over 75s are ‘inactive’, which means they haven’t made a move to switch recently and show no interest in doing so. Just 5% of this age group are categorised as ‘engaged’ which means they are aware of market changes and always try to find the best deal.
This compares with an average 14% of households that are categorised as engaged and 35% deemed to be inactive across all UK adults.
However, Ofcom pointed out that BT does offer a heavily discounted tariff under its 'universal service obligation', which requires basic services must be offered at an affordable price to households that meet certain criteria.
It offers line rental at £5.10 a month which rises to £9.95 a month if you take out a basic broadband service as well.
Compare home phone and broadband deals with broadbandchoices.co.uk
Other problems
Ofcom also identified promotional pricing as a problem.
This covers the trend of providers offering broadband deals at a discount. Ofcom fears those less engaged in seeking out offers or that don’t want to switch are missing out.
Ofcom says the gap between standard tariff prices for broadband and line rental and promotional prices has grown dramatically since 2013. It says by the end of 2015 discounted tariffs offered an average 20% saving compared to standard list prices.
The growing gap in the different prices paid by engaged and unengaged people is again likely to result in older customers paying far more than they have to.
The regulator is also concerned about the increasingly complex nature of pricing in the telecoms market.
It highlights time-limited offers, bundling services together and the ever increasing number of packages on the market as making it hard for people to compare prices effectively and find the best deal.
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What will be done
The Advertising Standards Authority last month announced proposals to make the advertising of broadband and line rental prices clearer.
Meanwhile Ofcom says it will continue to monitor prices, investigate how to make pricing clearer, look at how to improve switching rates (just 9% moved in 2015) and will examine whether there is a need for specific protection needed for standalone landline customers or vulnerable customers over the course of this year.
See if you can switch to a cheaper home phone deal at broadbandchoices.co.uk
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