In October 2012, SKY
announced that it would increase phone line rental charges by 18%. BT had
already announced inflation-busting rises. Virgin and TalkTalk had
already implemented way-above-inflation increases in line rental charges, but BT
and Sky are the dominant domestic telecoms suppliers. These
new charges were almost double those of the lowest-cost provider. There was no
justification for any price rise for line rentals at all. In fact, wholesale
prices were falling.
I called on the
Secretary of State for Trade and Industry and the competition authority (then
the Competition Commission) to launch an investigation into the telecoms’
suppliers and, particularly, into landline charges. 1
I strongly made the
point that increasing the unavoidable line rental charges meant that those who
made the fewest calls – typically pensioners on the lowest incomes – were
getting the highest percentage increases in their bills.
Further, I was
sharply critical of the suppliers’ claims that there was a ‘highly competitive
market’, asking how it was that BT and Sky managed to arrive at
the same charges for daytime calls and connection fees. I said that customers
were being taken for a ride.
But, what was the
response of the Conservative Minister, Ed Vaizey, and OFCOM then? They said
that they believed the retail market was competitive and
“… for
Ofcom to open up an investigation in this area, it would need evidence of an
abuse of a dominant position or evidence of collusion or anti-competitive
agreements.”
They refused to
budge from this position, despite the evidence staring them in the face.
For more than four
years, landline charges rocketed above inflation and many telecoms suppliers
have made a fortune at our expense.
Last December,
Ofcom announced a review 2 into “unnecessarily high charges paid
by the estimated two million households who pay for a standalone landline
service…. Ofcom is concerned that (these) people are not being served well by
the market.”
The regulator
finally admitted that all the major landline providers had raised charges
significantly since 2010, by between 28 per cent and 41 per cent in real terms.
This was despite benefiting from a 25 per cent fall in the underlying wholesale
cost.
Bluntly, customers
had been taken for a ride whilst OFCOM and the government had been asleep on
the job.
Now, OFCOM has
announced 3 that “More than two million people
who buy only a landline telephone service from BT would see their monthly bills
cut by at least £5 per month…”
The fact that OFCOM
has acted so quickly on some landline charges after such a short investigation
simply demonstrates the significant scale of the market abuse that has been
going on for so long.
As OFCOM now
confirms “Landline-only customers are particularly affected by price hikes
in telephone line rental. Major providers have increased their line rental
charges significantly in recent years – by between 25% and 49% in real terms.
This is despite providers benefiting from around a 26% fall in the underlying
wholesale cost of providing a landline service.”
OFCOM’s proposals
mean that BT customers with only a landline, currently paying £18.99 per month
for line rental, will pay no more than £13.99 – a reduction of at least 26%.
This cut returns the cost of line rental to 2009 levels in real terms, although
there isn’t a refund for the years when many customers have been fleeced of
some £300-400 each.
OFCOM has not
explained why its proposals only relate to BT. It is clear that other dominant
telecoms suppliers have been pursuing the same pricing policies. What action is
to be taken against them?
Neither has OFCOM
yet agreed to extend its investigations into all landline pricing, including
those forming part of bundles of services. It is very clear that the landline
price within bundled services has increasingly formed a larger part of the
total charge. Yet, as OFCOM confirms, this is despite a 26% cut in the
wholesale cost of landlines.
I’m pleased that OFCOM
has woken up at last.
Now that it is
awake, it needs to go further by (1) confirming that it is continuing to
investigate the significant increases in the landline-only charges of other
suppliers, and (2) extending the investigation to all landline pricing, whether
standalone or charged as part of a bundle.
1 LINE UP – we’re being taken for a
ride, 16th October 2012, http://www.clivebetts.com/
