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Ofcom: Rising line rental costs could impact vulnerable consumers

Wednesday, February 10th 2016 by Ellen Branagh

Telecoms watchdog Ofcom has voiced concerns over the increase in line rental costs and the impact that rising prices could have on vulnerable consumers.

In its tenth annual Consumer Experience Report, published today, Ofcom said it plans to look into several areas relating to pricing trends in the UK telecoms market, including “steadily increasing” line rental, as well as complex pricing that can confuse consumers.

Ofcom said the UK telecoms market delivers “choice and value”, but some pricing trends have given it “cause for concern” and need further investigation.

These include line rental. Figures in the report said the average standard line rental cost has risen from £15.70 in 2013 to £17.77 in 2015 and all of the UK’s largest residential providers have steadily increased line rental prices.

Figures in the report show that line rental per month has steadily risen from December 2010 to December 2015 for each provider. BT was up 23.3%, Virgin Media’s rose by 33.9%; TalkTalk by 33.1%, Sky by 44.1% and the Post Office by 24.1%.

This steady rise in line rental is due to a number of factors, Ofcom said, including a drop in the number of landline calls, which plummeted 37% between 2009 and 2014, and a shift from prices based on the amount of usage to bundles including things like unlimited calls.

According to the regulator, line rental price hikes will particularly affect the 10% of UK households who have a fixed landline but no fixed broadband.

This means they don’t benefit from the competition for broadband customers and also have fewer options when it comes to switching, with TalkTalk no longer offering a standalone voice service and Virgin Media and Sky “not actively promoting theirs”, according to Ofcom.

'Increasingly complex pricing'

Other areas of concern that warrant further investigation are “promotional discounting”, like "free" broadband for the first year, and “increasingly complex pricing”, the report said.

Promotional discounting might be positive for some consumers but if it comes with rises to standard prices, could be harmful to ‘less engaged’ consumers – often those who are older – who don’t hunt for offers or don’t want to switch.

Complex pricing is also an issue for concern, Ofcom said, with things like bundling, discounting, time-limited offers and a growing number of packages making it confusing for consumers and hard to find the best deals.

The issue of confusing pricing was raised by the watchdog last month, after joint research from Ofcom and the Advertising Standards Authority (ASA) tested consumers’ understanding of pricing offers based on their viewing of typical broadband ads.

In its latest report, Ofcom warned that the biggest impact of the rises would be felt by vulnerable consumers who depend on a landline but are least able to afford price rises. According to its report, 59% of those who only use landlines are over the age of 75.

It said it is undergoing several steps to monitor price increases, provide advice and information on pricing, and make sure consumers have the right information to get value from their providers.

This work will include getting information from UK operators on the actual prices paid by consumers, looking into how to make pricing information easier to compare, helping consumers to switch more easily, and looking at whether there should be special protection for landline-only customers.

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