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  Fixed Line Telephony, Broadband access

  Virgin Media, TalkTalk, Sky, BT

Proposal to end UK line rental for broadband puts £4bn at stake

More than £4bn of revenue is at stake under proposals by the UK government to end mandatory telephone line rental charges for UK broadband customers, many of whom do not use their fixed telephony connection. The UK Culture Ministry referred to the current system of bundling fixed phone with broadband as an "analogue billing system in a digital world” and through the suggested move hopes to increase pricing transparency for consumers, as well as allowing those who don’t use fixed telephony to opt out of mandatory line rental fees. This move could, according to Ampere data, have a substantial impact on revenue for UK telecommunications companies.

According to our market data, there were 28m fixed telephony and 24m fixed broadband customers in the UK at the end of 2015. Our latest consumer research suggests that 87% of UK fixed broadband customers take both fixed-line telephony and mobile connections. This means that 21m broadband households are potentially in a position to drop their fixed line telephony connections in favour of mobile. With current fixed telephony Average Revenue Per Line (ARPL) of £16.44 per month, this leaves up to £4.15bn of revenue at stake. 

If just 25% of multiplay customers cancelled their fixed telephony connections, telcos would have to charge an additional £4.28 per month (including VAT) to all fixed broadband customers to make up for lost revenue. Were 60% to cancel their connections, it would bring the additional cost to consumers to more than £10 per month.

Were this to come into play, not only could telcos (particularly BT, which wholesales lines to other telcos, and Virgin which has fully-owned infrastructure) see the loss of a massive revenue stream, but it could also have a negative impact on the burgeoning market for fixed wireless broadband, hitting providers such as Relish, which serve well-connected areas and use the lack of line rental as a selling point for their services.

According to Ampere data, the ARPL for fixed-line broadband customers in the UK at the end of 2015 was £18.54. This means that if half of customers taking both fixed telephony and broadband dropped their telephony subscriptions, the price of broadband would have to increase by nearly 40% for every broadband customer in order to offset the lost revenue.