A study published today by the Centre for Economics and Business Research (Cebr) highlights the excessive costs faced by consumers and businesses in unwanted landline rental charges and unnecessary installation costs, across London.
The study, commisioned by Relish Broadband, finds that over a third, (34%) of the capital’s population surveyed online say they rarely1 use their home landline for voice calls and 62%² of SMEs are confident that their business could operate effectively without a landline. Analysis from Cebr reveals that this could mean as many as 1 million London households and 240,000 SMEs are unnecessarily subject to a ‘landline tax’ costing a combined £193m per year. This landline tax represents an unnecessary imposed cost on those who pay for landline rental and associated installation charges, just to get broadband. The problem is worst in Central London where nearly half of all consumers (47%) would prefer their broadband package did not require line rental2.
In six major advanced global economies, landline subscriptions have fallen by 23% over five years, compared to a static number of subscriptions in the UK3. This is despite the fact that there has been a decline of 33% in UK household voice calls and 31% in business calls3. This lack of alternative data and telephony services in the UK costs households in London an estimated £156m per year in total (£149 per household)4 and SMEs in London an estimated £37m per year (£158 per average)4.
In the past 10 years, residential and business customers have experienced substantial hikes in their monthly line rental. In 2004, the average landline customer paid £9.50 in line rental charges. Ten years later, customers are being charged an average of £15.993, which represents a 68% jump in 10 years and this trend looks set to continue3. In comparison, CPI inflation has risen just 30%.
Colm Sheehy, senior economist at Cebr, said: “The fact that a landline is required for most broadband services despite falling call volumes indicates that many consumers are getting poor value for money from their monthly landline rental.”
1 Definined as using a home phone less than once a week
2 All survey figures, unless otherwise stated, are from YouGov Plc. Consumer Survey – Total sample size was 1,459 adults. Fieldwork was undertaken between 25th – 28th April. The survey was carried out online. The figures have been weighted and are representative of all London adults (aged 18+). YouGov Business Survey – Total sample size was 206 IT decision makers from London SMEs (businesses with less than 250 employees). Fieldwork was undertaken between 25th April – 6th May 2014. The survey was carried out online.
3 Cebr analysis of data from Ofcom Communications Market Report 2013
4 Calculation by Cebr using YouGov data. Cebr used data from the YouGov survey on the take-up of fixed line broadband and the usage of home phones (residential) / ability of SMEs to operate effectively without a landline (SMEs). This was applied to Census data (households) and ONS Business Count data (SMEs) to calculate the number of fixed line broadband customers affected by lack of choice in the market. This was in turn applied to the average annual landline rental and estimated installation and contract termination charges to determine the overall cost to London’s residential and small business fixed line broadband customers.