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Openreach line rental charges continue to diverge from retail price
Friday 02 January 2015 10:25:14 by Andrew Ferguson

Openreach has published its line rental changes for April 2015 onwards and these show basic voice line rental decreasing by 13 pence per month and fully unbundled prices increase by 11 pence, this narrows the gap between fully unbundled and the traditional WLR products. This narrowing is mandated by Ofcom and is based on the high levels of competition that exist in the UK, where LLU is available to 96% of UK households.

Comparison of wholesale versus retail prices for line rental
Click image for full size version.

The chart above was originally published in August 2014 but has been updated to reflect the new charges and changes in the retail price for voice line rental in the last few months. The divergence of the retail price and wholesale pricing is clearly visible.

The level of competition at the retail sector means the savvy consumer who is willing to switch provider can chase the best deals every 12 to 18 months and hopefully as 2015 progresses the new switching process from Ofcom will be rolled out after three years of work to deliver them and is well over due as more people are switching between the various full LLU offers and SMPF/WLR bundles.

Comments

Posted by TheEulerID about 1 year ago
A very nice chart. If inflation was taken into account, it's clear there has been a substantial drop in the wholesale costs.
In the case of retail prices, I suspect the increases are partly to keep down the headline pricing of broadband packages and also the fact that fixed line call revenues are collapsing. Then add to that recovering costs from all those cheap new customer packages.
Posted by TheEulerID about 1 year ago
I've just looked it up, and inflation from 2007 has been about 16%. Also, in looking at retail prices, there was a 2.5% increase in VAT in 2011.

Another I also note is the strong level of convergence on line rental among the market leaders so there's now next to nothing separating them.
Posted by c_j_ about 1 year ago
"line rental ... market leaders ... now next to nothing separating them."

How do we spell c*a*r*t*e*l ?

"fixed line call revenues are collapsing"

And whose fault is that?

Customers can pay 5p (total) for an hour-long UK call via an alternate carrier.

Or they can pay BT a 15p "call setup" charge and then pay the per-minute rates on top.

The 15p and per minute stuff doesn't apply if you pay for a calls bundle, which each major telco charges identically (!).

Ofcom? Supercomplaint?
Posted by TheEulerID about 1 year ago
Fixed line call revenues are collapsing for many reasons. It's an international phenomenon, following increased competition, mobiles, VOIP, Skype all reducing margins. It's just the outcome of the way technology and the market has moved. Telcos have been forecasting the loss of POTS revenues for a couple of decades.

As for a cartel, proving that means showing agreements exist. Which I doubt. Probably it's just because of the practice of major SPs to slightly undercut BT pricing.
Posted by mdar5 about 1 year ago
Strangely convergence of pricing can also be due to the economic theory of 'perfect competition' where there are lots of providers and everyone's cost are the same and no one can establish a market dominant positio.
So the result is the product becomes like a true commodity such as copper etc for which everyone charges exactly the same price.
Posted by comnut about 1 year ago
the reason Fixed line call revenues are collapsing, is a lot do not want to be burdened by the line rental 'lock in'

Many now use a mobile phone with 'pay as you go' .. NO line rental, standard call charge and DUMP them if you dont like it!! :) :)
Posted by gc01 about 1 year ago
Most ISPs are using the big margin they make on reselling BT line rental to subsidise their broadband offering (particularly FTTC). This suites Sky and Talktalk etc. who seem to just follow BT retail's line rental charge. It's a big disadvantage to those consumers who don't need or want broadband. It wouldn't suprise me if many consumers stated switching to using mobile only in their house and getting rid of the land line.
Posted by cyberdoyle about 1 year ago
Its a superfarce. There is no competition when one company owns all the infrastructure. Most folk who have a landline have it only for broadband and use their mobiles for calls. That is why BT has had to make sure nobody gets the freedom of fibre, as long as they can keep everyone tied to the old phone lines with FTTC they continue to leach the assets of their obsolete network. The foolish government has aided and abetted them in this.
Posted by Gadget about 1 year ago
@CD - unfortunately for you there are at least two infrastructure providers in around half the country (Openreach and Virgin Media). So is your issue that you must have FTTP to make use of VOIP in all its forms, because that also is incorrect.
Posted by TheEulerID about 1 year ago
@CD

BT OpenReach have around 25 million lines. That means wholesale revenues of about £2.3bn, or rather less than the 13% of BT's total turnover of £18bn. OR's network is on the books at £13.7bn. Even net off the fibre, switches and so on, it's about £12bn (the copper bit is about £4.6bn, the rest is ducts, buildings etc.) The actual return on capital employed is modest.

Scale up the JT fibre project across the UK, would add £28bn to the capital invested (mostly in labour costs) and require something like a 70% increase in line charges over maybe 30 years to pay for it.
Posted by TheEulerID about 1 year ago
A reference for source data on this

https://www.btplc.com/Thegroup/RegulatoryandPublicaffairs/Financialstatements/2013/CurrentCostFinancialStatements2013.pdf
Posted by csimon about 1 year ago
So we can deduce from this that "high levels of competition" result in less choice (as the retail providers have all converged on price) and ever increasing prices. This is completely the opposite of what is always promised.
Posted by pfvincent about 1 year ago
@cyberdoyle "Most folk who have a landline have it only for broadband and use their mobiles for calls." Do you have any statistics to back this statement up? Most people who ring me do so from their landline, and since with the now near universal use of DECT phones this can be done from anywhere in the house, why ever wouldn't they, since call quality is usually better!
So far as I'm concerned a mobile is for mobile communication, and is switched off when I get home.
Posted by PhilipVirgo about 1 year ago
I am intrigued by the ever increasing claims as to the cost of fibre roll out (TheEulerID above). I am involved with organising a meeting to bring property owners alongside network operators to discuss co-operation on wayleave and aerial agreements and planning permission and have been told that this could could cut 80% and more from the cost of newbuild and upgrades to address the fast growing (wehtehr perception or reality) problem of inner city not-spots. I am told the same applies to rural not-spots. That leaves the suburbs. Are they very different?
Posted by PeterBrunning about 1 year ago
If you live in the countryside, you are lucky to get adequate quality of calls on mobile, especially while inside buildings. Indeed, there are plenty of places with little or no mobile signal within a couple of miles of major cities. In these cases, a landline (or possibly some form of VOIP) is certainly either vital or much preferred for calls.
Posted by csimon about 1 year ago
Yeah, I've got no mobile signal at the house so still need landline for calls and emergencies. Paltry ADSL service, no fibre-based broadband available. Still waiting for all that choice at low prices to materialise!
Posted by TheEulerID about 1 year ago
@PV

There is not "ever increasing" estimate. The figure of £28bn for a national roll-out has been around for a long time. It's about what Jersey is costing (on a per premises basis). It's also what the BSG estimate back in 2008 (link attached) for FTTP (albeit the non-GPON version). Yes, new builds can be done cheaply, but that's a tiny portion of the whole.

http://www.analysysmason.com/PageFiles/5766/Analysys-Mason-final-report-for-BSG-%28Sept2008%29.pdf
Posted by BBSlowcoach about 1 year ago
Like Mr Brunning I live in the country. At home all day, the idea of taking/making all my calls in the street does not appeal. My Exchange is not unbundled (but some of the Exchange cabs have been 'fibred' - my cab is not scheduled to be upgraded any time soon, if ever) BT retains a virtual monopoly. TT has installed 21CNWBC gear that gives me BB speeds around 2.5 x the aspirational nat min. BT has to clawback the vast sums it is pouring into sports personality pockets. Line rental is an obvious source to tap. The govt is playing the same trick to pay for 'renewable' energy generation.
Posted by BBSlowcoach about 1 year ago
If space had permitted in my post above and for the younger generation, I was intending to add the following:
At the discovery of North Sea gas, every property connected to the grid had its appliances converted to use it - FOC. Help was made available for some with the switch to digital TV. The advent of fibre displays very vividly how far this country has sunk regarding universal service provision. The political bickering has become an industry in itself. The country should be ashamed of itself. Level playing field in the NHS anybody?
Posted by csimon about 1 year ago
@BBSlowcoach: to be fair (and I'm the first person to moan about the state of things!) public assistance *is* being made available to those left without decent BB by the major operators,in the form of BDUK, & there'll be financial help where it fails to do so.But it's ongoing & plenty of areas still left to do.The mistake was putting it into the hands of the private sector in the first place. Mobile reception is also ongoing & there has been public intervention again,resulting in the operators agreeing to improve coverage. (Blackmail is such a dirty word, but it works!)
Posted by Teefenn1 about 1 year ago
"a mobile is for mobile communication, and is switched off when I get home"
I agree,pfvincent,and you haven't even mentioned costs. Why would I use a mobile at exorbitant cost?
I suspect cyberdoyle is one of those types that use their mobile all day long so it makes sense to have a contract with free calls. Trouble is such people think everybody is like them. For those of us that don't spend half their life on their mobile it makes sense to have a PAYG mobile for emergencies but the cost is prohibitive for routine calls of any length.
Posted by TheEulerID about 1 year ago
@BBSlowcoach

In choosing natural gas, you made a rather silly choice as it undermines your whole argument. There are many places where natural gas was not an option because the gas grid never got that far for precisely the same reason. It was too costly to connect. That applies to other infrastructure services to some extent or another like rail, sewerage and bus services.
Posted by BBSlowcoach about 1 year ago
In response to TheEulerID, I chose the gas analogy to show that where there is a strong political will there is a fast an effective outcome. How much better this country would now be economically if politicians had agreed a programme of FTTP in the way that it was necessary to convert all gas appliances to natural gas to facilitate the switch from coal to natural gas. Even at 2.5 times the national aspirational minimum speed I often suffer crashes due to lack of band width. Any business, however small, trying to set up in my area hasn’t a hope.
Posted by andrew (Favicon staff member) about 1 year ago
The will did not extend to all households, since plenty still have no access to gas and some still have no mains sewage.

Crashes? One presume you mean dips in speed, in which case it may not be the broadband, but might be the choice of provider and the bandwidth allocations at peak time.
Posted by ukwoody about 1 year ago
No mains gas within 4 miles, no mains sewerage, virtually no mobile coverage, good but somewhat bubbly water supply, a phone line that crackles like hell because its 7km long,to an exchange that doesn't even have adsl2+ It's due to be FTTC later this year, but apparently about 60% of the lines are like mine which are EO. I live in a village in Wales with 20 properties. Having spoken to Superfast Cymru there isn't much likelyhood of anything for us for at least 2 years. Yet we're only 3.5 miles from the main county town.

Posted by BBSlowcoach about 1 year ago
The 'will' I refer to was to those on the main gas supply. The same 'will' could have been used to those with a live telephone connection as at a certain date. The crashes I refer to could be software related but they are same behaviour as when I knew my speed was intermittent @ best. It was fixed in 2013 by TalkTalk/Openreach. Since then at every check it has been steady around 5.6mbps. Crashes/outages/cutoff's still happen & not always when I have multiple tabs open. Deep sympathy for ukwoody. To lucy121 don't be tempted to spend it all at once.
Posted by chrysalis about 1 year ago
The line rental doesn't tell the whole story cost of calls on fixed lines has also turned horrific with connection charges etc.
Posted by chrysalis about 1 year ago
For me if EE 4G drops to 50gig usage below £40 (with also mins etc. in price) or 100 gig for under £50, I would seriously consider ditching all my fixed line services.
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