Market Insight

Vodafone claims to cut line rental charges from UK fibre broadband deals

August 10, 2016  | Subscribers Only

Alzbeta Fellenbaum Alzbeta Fellenbaum Manager – Research and Analysis, Service Providers & Platforms

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Vodafone is to ‘abolish’ its home broadband line rental charges in the UK as part of its new home broadband pricing structure. Line rental will not be charged to new and upgrading customers to its Vodafone Unlimited Fibre Broadband services.

Vodafone offers two unlimited fibre broadband services with speeds at 38 Mbps and 76 Mbps respectively. As part of the deal, customers are expected to commit to an 18 month contract. Monthly payments will be £22 ($28.6) for upgrading customers to the Unlimited Fibre 38 service and £25 for new customers. A monthly charge of £28 will be levied on all customers signing up for the Unlimited fibre 76 service. In addition, a one off £49 fibre connection fee will also be charged. According to Vodafone, there are no hidden monthly fees or usage caps.

Most UK broadband users are expected to pay line rental for a landline connection in addition to a charge for the broadband service. In Vodafone’s view line rental is an expensive additional cost for an underused service, and one of the reasons why Vodafone has decided to omit this cost from future fibre broadband services.

Our Analysis

Vodafone is the second UK broadband player to announce the cancellation line rental charges to the end user in recent years, since TalkTalk confirmed back in June 2015 that it would not be charging line rental for its Ultra Fibre Optic service launched in May 2015. The main difference is that this service is based in the City of York and actual coverage is much less than the 20,000 premises previously expected by this time.

While it is true that Vodafone does offer the cheapest equivalent service when compared to the other players such as TalkTalk, Sky, BT and Virgin Media, the total savings fall short of the monthly line rental. For example, when compared with the ‘Totally unlimited fibre broadband (38 Mbps)’ service offered by TalkTalk nationally, the saving for existing customers over 18 months is £87, which is around £5 per month - much less than the typical £18 per month line rental on average charged by TalkTalk, Sky, BT and Virgin Media.

In addition, linking the line rental charge to the use of a landline phone is somewhat misleading. While it is true that the use of landline phones is considerably less than it was 20 years ago, in the majority of cases fixed broadband customers still use the national telephone network owned by Openreach for their internet connection. Connections using VDSL (fibre-to-the-Cabinet) and ADSL still utilize a copper component of the telephone network from the cabinet to the home, and the original reason for charging line rental was to cover the cost of maintaining the line.

That being said, the fact that Vodafone is moving to a pricing strategy that illustrates once single price is a good thing. The Advertising Standards Authority in collaboration with Ofcom announced that they would be adopting a “tougher approach” to ensure that consumers are not confused by current fixed broadband marketing strategies, including the annoying habit of including the line rental charge in the small print. The new approach will come into force on 31st October 2016, so Vodafone’s announcement is well timed. Hopefully other fixed broadband ISP’s will follow suit.

 

Geography
UK
Organization
BT Group Vodafone
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