Line rental prices up 41% in just six years while wholesale costs fall by a quarter, watchdog reveals – so is it finally about to clamp down on price hikes? Line rental up 41% in six years, overheads fall 25%

Watchdog finally probing the cost of landline rental prices. Prices have risen even year despite wholesale costs falling. Ofcom believes elderly and vulnerable are worst hit by rental increases.

Households are being ripped off when it comes to landline rental prices, damning evidence from Ofcom suggests.

Telecoms providers have been rising line rental prices consistently since 2010 largely blaming ‘infrastructure costs’. The watchdog says wholesale costs have actually fallen by a quarter in that period.

As a result, it has finally today launched a review into the monthly cost faced by anyone who wants broadband. Even if they don’t use the landline telephone.

The watchdog says line rental prices have risen between 28 and 41 per cent in real terms since 2010. This, despite providers such as BT, Sky, TalkTalk and Virgin Media benefiting from a 25% fall in the wholesale cost. For providing a landline service.

Line rental up 41% in six years, overheads fall 25%

Rise and fall: This chart from Ofcom shows how the gap between line rental prices and wholesale costs has widened since 2010

Last year This is Money blasted Ofcom for failing to act on what we described as ‘cartel’-like behaviour. Providers continue to raise costs yearly without real justification.

It now appears Ofcom may finally clamp down on the unfair practice amid concerns people are not getting value for money.

The rise in rental prices have particularly hit those who rely solely on landlines, such as the elderly and vulnerable, the watchdog says.

Line rental up 41% in six years, overheads fall 25%

The probe will decide whether steps are needed to protect them with a consultation expected early next year.

Ofcom adds that the elderly and vulnerable are more likely than most to have stayed with the same phone company all their life.

They also do not benefit from strong competition in the market for ‘bundled’ communications. This is where landline, broadband and pay-TV services are packaged together.

Jonathan Oxley, Ofcom’s competition group director, said: ‘Our evidence shows that landline providers have been raising the price of line rental, even as their costs have been coming down.

‘We’re particularly concerned for older and vulnerable customers, who rely on their landline and are less likely to change provider. 

‘So we’re reviewing this market to ensure these customers are protected and getting value for money.’

Ofcom says it has been tracking landline rental prices for some time. 

Its review will see if any one provider has significant power.

It has been pointed out in the past that when one provider nudges landline prices higher, others follow suit. 

 In fact, last year BT simply told us its price rises were ‘in common with the rest of the industry.’

At BT, line rental alone is £18.99 per month. At Virgin it is £19 and Sky £17.40 each month.

Line rental up 41% in six years, overheads fall 25%

Ofcom says that competition in the telecommunications sector remains strong. Britons are now getting better value for money in recent years.

It says wholesale costs have fallen thanks to increased efficiency and declining capital values of aging technology.

Ofcom published research it carried out with the Advertising Standards Authority on consumers’ understanding of how broadband prices were advertised. This included the separation of line rental charges.

The ASA introduced new rules in October requiring broadband prices to be clearer and inclusive of line rental.

This could benefit customers taking bundles and reduce incentives to increase line rental charges, the watchdog believes.

However, it is unlikely to benefit landline-only customers – another reason that Ofcom is reviewing the market. 

Richard Neudegg, head of regulation at comparison website uSwitch, said: ‘Landlines are a lifeline.  Even for those who don’t want broadband, often the most vulnerable. The prospect of ever-increasing line rental charges still looms.

‘The ASA’s reforms to require all-in costs for landline and broadband services should help matters. This is by putting more competitive pressure on the providers. 

‘They now have greater incentive to compete on line rental as well as broadband pricing. This to make their combined costs appear more attractive.’

Line Rental Rises 41% In Six Years, Overheads Fall 25%
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