Business

Why are phone line bills rising?

Phone frustration Image copyright Thinkstock

For many telephone users, the number that requires the most attention is the one on the bottom of the bill.

So, news of more price rises coming into effect this week is likely to be met with frustration.

BT, which has about 10 million landline customers in the UK, is putting up its landline cost to £17.99 a month. It is the latest in a series of price rises, meaning the cost has risen by 35% compared with five years ago.

It is not the only supplier to put up the price of relatively basic services. For example, the cost of simple broadband with Talk Talk will have tripled in 18 months when its latest increase comes in next month.

The result, according to consumer group Which?, is falling customer satisfaction ratings among the majority of telecoms providers.

So, why do these prices go up, does this mean customers are getting a bad deal and what can they do about it?

Changing technology

Image copyright Reuters

Communications - and the hardware involved - have undergone a revolution in the course of a generation.

Gone are the days when the fixed-line telephone in the hallway at home was the most likely way of contacting family and friends.

Now, according to regulator Ofcom, about 84% of households still have a fixed telephone line, but 82% are connected in some way to the internet - through computers, tablets and mobile phones.

So the emergence of broadband - a development unheard of a generation ago - has fundamentally changed the offer from telecoms companies.


Key information

Rules on switching have changed meaning that mid-contract customers have 30 days to switch penalty-free after a provider says it is raising prices in a package.

For people on certain benefits there is a basic service which BT is legally obliged to offer. This is currently £15.30 for three months including £4.50 worth of calls plus another £4.85 for 10GB of basic broadband a month.

Ofcom has published a guide for anyone switching to ensure they are aware of what a deal includes.


The telecoms companies argue that individual services should not be taken in isolation.

The packages that they offer come with a whole host of added features, with the cost of calls often included, and the companies also say they are investing in the new technology that has changed the way we communicate with each other.

Talk Talk says that extra features such as voicemail, caller identification, nuisance calling, as well as security software for internet users, are being added at no extra cost to packages.

"We're investing in adding more to our packages to meet our customers' ever-increasing needs," a Talk Talk spokesman said.

Line rental costs

A BT spokesman said: "We realise that customers never welcome price rises, but we have ensured that low-income customers avoid price rises. We continue to offer money-saving options for all customers."

"BT is investing more than ever to bring our customers the best deals across bundles of line, broadband and TV. We have spent billions rolling out superfast fibre broadband to 80% of the UK."

The companies are keen to point to the cost of bundles - including landlines, broadband and TV - as line rental costs have risen, but overall spending is down.

Yet, consumer group Which? tracked one part of that - the cost of line rental - and found that it cost 45% to 64% more at the end of 2014 than in 2008 - outstripping the cumulative inflation rate of 20.5%.

A study by regulator Ofcom last year found that people who only have a fixed line are most likely to be on lower incomes and the least likely to switch so would not benefit from other special offers or bundled deals.

Research by BBC 5live suggests that rises in landline costs have outstripped rising energy bills, which have gone up by about 20% in the last five years. They have also risen faster than the general increase in prices - measured by inflation - of about 14% over the same period.

Overall, though, Ofcom highlights how the average amount spent on telecoms services has dropped from £87.20 in 2009 to £81.30 in 2014. This average, however, is based on a big increase in the numbers of users of services such as mobile data and high-speed broadband.

Switching

Image copyright Thinkstock

The regulator argues that competition in the market is essential to keeping prices down.

"The UK market remains very competitive. Ofcom recently made switching telephone and broadband providers much easier for millions of consumers," a spokesman said.

It is also carrying out a review of the telecoms market which it says is "designed to ensure it continues to work for consumers".

Consumers need to play their part in a competitive market by reviewing their finances and switching suppliers for better deals.

'Tempting offers'

Prior to the new rules on switching, the number of people changing supplier was relatively low at 7% in 2013.

"Make no mistake; being loyal to your broadband or home phone company will cost you dear," says Hannah Maundrell, editor of money.co.uk.

Most companies offer deals on broadband and call charges for new customers although landline costs are usually fixed by all of them as most still use lines owned by BT. Customers can get cheaper landline costs if you pay for 12 months up front.

"Tempting sign up offers don't last forever and most have an end date after which you pay more. You could save hundreds of pounds a year by being agile and switching," Ms Maundrell says.

Many customers, she says, can easily miss price rises, which can occur midway through the contract.

Rules on switching have changed meaning that customers in this situation have 30 days to switch penalty-free after a provider says it is raising prices in a package.

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