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Could Goverment pressure mean an end to voice line rental?
Tuesday 22 March 2016 05:43:49 by Andrew Ferguson

The cost of voice line rental at the retail level has continued to increase year on year for some years and diverge from the actual wholesale cost. The reductions in line rental at the wholesale level being the result of regulation by Ofcom and are in themselves a matter for discussion since the pressure to improve fault repair and service levels in Openreach may start to lead to them increasing.

The Culture Minister Ed Vaizey appears to be bypassing the traditional Ofcom regulation path and is asking for round table discussions before Parliament breaks up for the summer so that a solution can thrashed out that will mean those who don't make use of the land line for telephone calls do not need to pay the typically £15 to £18 line rental cost. Ofcom and the ASA are already moving to revising the rules around how broadband packages can be advertised and insisting that voice line rental be rolled into the broadband package cost where it is part of a bundle.

Not paying voice line rental if you make no phone calls would be a massive vote winner, but given that xDSL broadband is reliant on at least some copper loop means something needs to be charged for that element. The debate about naked DSL i.e. where you pay only for the broadband surfaces at least annually, and to some extent the soon to launch at the retail level SOGEA FTTC product which will cover the VDSL2 and copper loop elements in a single product is an industry reaction, no pricing is available yet, but we expect SOGEA to cost less than an existing up to 38 Mbps VDSL2 service when combined with the retail price of voice line rental, not a full £17.99/month less but may save people £3 to £5 per month. The SOGEA product expected is likely to still include a voice service but delivered as a VoIP product but presented in a way that works with traditional telephones.

We believe the reason the voice line rental has bucked the trend in reductions at the wholesale level is that the revenue and thus profit from voice line calls has plummeted in the last decade, driven by people making good use of call bundles and the way that communications is changing with social media replacing the old fashioned gossip phone call.


Posted by TheEulerID 7 months ago
Any idea that SOGEA will save substantial amounts is surely unlikely. MPF (after VAT) is about £8 per month. Any cost savings to OR will be small as all th ducting, poles and the subloop will remain. Just about the only savings in the short to mid-term will be reduced faults on th e-side. I'd be surprised if it's more than £1 or £2. Sub-loops have been available before, and they aren't much difference in price to MPF.
Posted by TheEulerID 7 months ago
I've just looked at the OR price list, and the annual rental for a sub-loop is £93. per annum whilst the full MPF is £87.48 (SML2) exc. VAT. On that basis, SOGEA would cost more than providing FTTC on a fully unbundled line at the wholesale level. Of course prices might change, but surely not massively.
Posted by csimon 7 months ago
Its' more eveidence that competition and the free market hasn't worked. Wholesale cost has reduced and retail cost keep increasing. Failure to start with. Why does it increase at retil level? Because people are making use of bundles. Bundles are anti-competitive measures designed to lock people in and were introduced by the retailers themselves. They are having their cake and eating it. Make bundles seem more attractive, lock people in, then increase the price elsewhere to compensate.
Posted by Bob_s2 7 months ago
This has not really been thought through. If you use Broadband you use a line. You could just include the line rental in the Broadband charge but what happens if someone has the voice line with another provider? what happens if you have a voice only line do you not pay line rental?

The real problem is the vertical integration of BT. There are suspicion that BT is loading a lot of non line costs onto the rental
Posted by jumpmum 7 months ago
SOGEA will still need either a copper pair back to the exchange for the existing line test, or test heads provided in every cabinet with remote access to them to test the copper portion of the line.

The first will cost very similar to MPF the 2nd will cost a significant capital and system outlay ( and take time).

Without line test no-one will have any idea where a fault is without an engineer visit or even if there is one. ( Anyone can run a line test at present if non-LLU, and LLU providers and OR run on LLU)
Posted by TheEulerID 7 months ago

You comment makes no sense with regard to BT vertical integration. It's pretty obvious all the major ISPs are loading some of their BB costs onto line rental, not just BT Consumer.

This is all just a presentational issue lead by ISPs who want to headline a low (or even free) price for BB and just recover the costs elsewhere. Just look at those ISPs emphasising "free" BB for how the game started.
Posted by Blackmamba 7 months ago
Hi Broadband Watchers.
All that is required is the line rental to be reduced ( E side %) on lines that are on FTTC to customer that do not use the E side this would get more customer to switch ,this would also stimulate the fibre section thus off loading the exchanges.
Posted by andrew (Favicon staff member) 7 months ago
@Blackmamba If those FTTC customers are using the voice side why reduce the price?

Are you aware of the SOGEA product?
Posted by DrMikeHuntHurtz 7 months ago

We have neither real competition or a free market.
Posted by pgnl 7 months ago
It most certainly does feel like all the phone companies are operating like a carte. They see a min £1 pm increase each year on line rental as their right. This should be based on cost, with a max % allowance for profit & perhaps a reduction for those taking broadband as well. Is not just the line rental that is going up, many have removed the previously included evening & weekend calls & also increased the cost of call bundles. Come on Ofcom, sort it out, make it fairer for all, clearly the telecoms sector aren't going to do it themselves...
Posted by mhc 7 months ago

Another demonstration that politicians do not know what they are talking about!

Why can they not just stay out of subjects they know nothing or very little about?

Posted by AndrueC 7 months ago
@mhc: They'd have nothing to do then ;)
Posted by kijoma 7 months ago
interesting. probably the most sensible thing i have heard Ed say. so it will not happen :) . with genuine non openreach providers their hasn't been a need for llne rental.. ever. or expensive calls and bundles.
Posted by zyborg47 7 months ago
While I understand that the network needs to be maintained and that the line rental go towards that, £15 or more a month for that is way over the top and a lot of the time even the free calls have gone, so for our £15 or more a month we get nothing. I have been waiting for years for the line rental to be reduced, because at the moment it is just a swizz.
Posted by davidinnotts 7 months ago
The basic issue is that the providers - and especially BT - with old-fashioned customers who have never switched, especially those with just a phone connection, seem to regard such people as not needing consideration; they are unlikely to make much protest, nor to leave their provider no matter what.

Posted by davidinnotts 7 months ago
In reality, almost all the cost of providing and maintaining the local connection is the same, whatever services are taken.

So a discrete charge for that is fair, and it makes sense for Ofcom to insist that it is kept discrete on the bill so that overcharging is obvious. Both Virgin and wireless provision could be asked to do the same, to assist comparison, with an open investigation of each provider to keep things above board.

The providers will resist such openness, of course!

Posted by knicol46 7 months ago
Nothing will change the offers will be something like..

Line Rental £17
Broadband £17

Special offer: save £17 if buying the 2 services together! exactly the same cost as it is now just worded differently.
Posted by 69bertie 7 months ago
When we had fibre installed and actually managed to have a choice of supplier other than just BT, looking around I found it strange that BB and a phone line bundles frequently came in cheaper than just having BB on its own. Something not right there. Yes, I might need a phone line to get bb but do I need the equipment to make a call that I never use?
Posted by jumpmum 7 months ago

Please see my comment on linetest. The pair from FTTC cab to exchange is still needed, or a new test mechanism.

What is wrong is that the OR price has decreased every year but the Retail price keeps going up. This just hides the true cost of the BB in the linerental. OR WLR price is only £7.23 pcm for the pair. MPF charge is £7.10 pcm so you could deduce the Voice part is 13p pcm. SMPF is 21p pcm so not a lot of saving.
Posted by chrysalis 7 months ago
Sadly unless the retail side prices are regulated I dont think a great deal would change, £5 month savings sounds too optimistic. I expect we may possibly see broadband only line products emerging but they will probably only save about £2 month maximum, better than nothing but these companies arent going to just throw away the revenue this practice generates.
Posted by chilting 7 months ago
Maybe this is a chance to have a fixed line rental just charged once per line regardless of what it is used for. The amount could be set by Ofcom and ring fenced for Openreach to use only for maintenance and improvements to their infrastructure.
Posted by jumpmum 7 months ago
This already happens at an OR level. ( prices from 01/04/16)
OFCOM set OR ceiling prices for CPs to pay
WLR ( Pair + Voice) £86.76 pa
MPF ( Pair only) £85.20 pa
SMPF ( BB only + WLR from a different supplier)
£2.50 pa ( + £86.76 WLR)
The MPF cost could be inferred to be the fixed line rental only. BUT CPs mark it up hugely to subsidise the BB cost.
Posted by Saurus 7 months ago
Line rental is just guaranteed income, don't have to do anything for it unless something goes wrong.
They won't want to let go of their cash cow and will fight tooth and nail and be dragged kicking and screaming if they are forced into changing anything. As they already have massive influence through Ofcom and lobbying I doubt it will change much for the customers, just moved onto a different part of the bill.
Posted by chilting 7 months ago
Well if that's the case only a moron or politician would call for change.
Posted by andrew (Favicon staff member) 7 months ago
@chilting Those are the right prices and the 1st April ones include a 24p reduction in revenue to Openreach to pay for the local loop too.

Oddly when line rental goes up by its usual 50p to £1 per year there is a big outcry, but when broadband rises by the same there is barely a whimper.
Posted by _Mike_B_ 7 months ago
@jumpmum You'll know all of this but for the benefit of others:
E-sides will still be needed to be able to test the D-side from the test heads located in the exchange. If the E-side developed a fault it would still need fixing too.
The Brandeburg test system used for FTTC can detect things like HR faults on the D-side and doesn't require the E-side as far as I can tell. It looks at the characteristics of the broadband connection and figure out what the fault is. Different from how the test heads work. But it can't see things like earth faults, or battery faults which the test heads can
Posted by mdar5 7 months ago
@Sarus: line rental a cash cow eh? - not on the 3 house's line connected from 'my' distribution point it ain't.
I've been cost-estimating up the repair bills including a new pole plus fittings which is around £2K and I reckon BT has not even broken even over the last 20 years+ of revenue for ALL three houses.
Posted by csimon 7 months ago
@69bertie: "looking around I found it strange that BB and a phone line bundles frequently came in cheaper than just having BB on its own. Something not right there. "

Exactly! The bundle is a more realistic price, they're still making huge profits on it, but I think the individual product prices are inflated to prevent you shopping around and to make you get all services from the same provider. It's so obvious, why is this not anti-competitive, anti-choice and why hasn't it been stopped?
Posted by csimon 7 months ago
Then again...if it was stopped then all prices would rise anyway and the whole industry would act like a cartel and they all follow suit. The model is completely broken, the companies are out of control. It's OK for non-essential produces and services to be left to the market with dozens of providers all competing, but for essentail services and infrastructure that everyone needs they have us over a barrel. We have to get it from somewhere, we don't have a choice as to whether to take it or not.
Posted by TheEulerID 7 months ago

Really? There's no competition? Firstly, in about half the country there is VM as an option. There are three major ISPs and a host of small ones. Have you thought that the reason the prices roughly converge is that the costs they are all presented with are roughly similar too? They all use much the same building blocks, have call centres to run, IT systems, backhaul networks, peering arrangements and much else, all with fairly consistent market prices.

Until & unless there was a disruptive technology, then market convergence on price of commodities is what is to be expected.
Posted by csimon 7 months ago
No VM in the other half of the country. I guess that's OK then, you have declared that there is compeyition because London has VM.

There is no competition because like the energy markets they're all selling the same product with the same wholesale costs.

There is no competition becuase bundling is anti-competitive. If you accept bundling, you are fordbidden from using another provider. If you don't accept it, you pay over the odds. that is not how competition is supposed to work, therefore there is no competition.
Posted by csimon 7 months ago
Like energy products, it's fake competition and fake markets, designed to make money for businesses while distracting the public by conning them that they have a choice and making them spend our time in frtutiless seaches and contunually switching providers.

You have accpeted that commodity prices are the same therefore prices converge (and as we can see actually increase) regardless where you buy the product from, so what is the point? There is no choice.
Posted by _Mike_B_ 7 months ago

Don't be silly. 50% of the UK population has access to Virgin Media.

I'd rather a separated line rental, as now. It's really a line maintenance charge, they could drop the dialtone requirement and then rename it "line maintenance charge" but it would only reduce by a few quid.
Posted by godsell4 7 months ago
OFCOM should force the ISP to show, at time of sign up at least, the indication of the total fixed costs paid at 6m intervals for the whole time there is any kind of fee to exit the contract or fixed period. Then all is transparent.
Posted by gsituffers1 7 months ago
im glad to see such a healthy debate about line charges and the fact their hiding the true cost of bb and only with all yourselves and you lobbying and support and applying pressure will the powers that be change this for the better and clearer - selling vm bb on its own for £30 for 50mb bb and trying to advise customers that £30 is better than £20 + line rental is still a saving and not a con !
Posted by WWWombat 7 months ago
VM offers some level of competition in 50% of the country. That helps there, right?

In the next 40%, there is no VM but there is still TT and Sky as LLU. Do you see higher prices in those areas? No? It seems the competition with VM extends its influence beyond the 50%.

In the last 10%, with LLUs, do you see higher prices there? Only for some ISPs like Plusnet, but not others, like BT. That competitive effect is still working, then...

Of course, the last area has higher wholesale prices mandated by Ofcom, in order to stimulate LLUs.
Posted by TheEulerID 7 months ago

The reason why you still want competition, even though cost inputs are broadly comparable, is that a single retail supplier would be able to increase prices beyond what the inputs would merit.

Also, the competition from VM has national effects due to the prevalence of national pricing regimes save the relatively small part represented by market 1 exchanges (and that's manipulated by Ofcom).
Posted by bobgarb 7 months ago
I've had a Broadband connection without needing a land line for years with Virgin Media and use a Voip router to create my own land line, in the USA they have naked ADSL where you can subscribe to Broadband only without a landline!
Posted by michael_s_perry 7 months ago
This idea is detrimental to those who do not want broadband, there are a great many who do not use not want to use any form of broadband. They want a voice only line at reasonable cost. Consider disabled people who are not computer literate but need some form of emergency contact system - many of those rely on landlines for voice communications.
If they combine them, they must allow for voice only lines too.
Posted by silverdove 7 months ago
Please would someone tell the regulators/Government/whoever that speed is not everything. Unlimited access should be part of the roll-out - especially where wireless is concerned. It's no use streaming movies if your allowance 10gb.
Posted by Tropi 7 months ago
I hate a separate line rental charge. I could not care less how the charges are made up. All I want to know is how much do my phone calls cost when I make them and how much does my internet access cost when I use it. When comparing suppliers, that is ALL I need to know. The nonsencical line rental charge should be completely abolished and the sooner the better.
Posted by Bob_s2 7 months ago
Most of the line costs are there whether you use voice or not at most it might be about £1 less. The bigger issue in my view is the vertical integration of BT who appear to have been loading non line costs onto the line rental. Whilst Openreach is a part of the BT group it is almost impossible to get clarity of the actual costs. The simplest way forward and OFCOM may do this is to split Openreach from the main BT group and make it a separate wholly owned BT Company. Dabs for example are a seperate BT Owned company
Posted by NilSatisOptimum 7 months ago
The day line rental disappears, its the day metered broadband usage reappears. Be warned!
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