Ofcom allows BT's cheaper phone, TV and broadband packages

Telecoms watchdog lifts restrictions on BT bundling services at discounted rates

BT tower looms over two runners in Primrose Hill. BT's share price rose on news that Ofcom had lifted restrictions.

BT's 14 million landline customers could see their telephone, broadband and pay-TV bills reduced after a watchdog's ruling paved the way for more competition between telecoms companies.

Ofcom has lifted restrictions placed on BT when it was privatised in the mid-1980s which prevented it from bundling together services such as broadband and a landline in a discount package.

The change means that BT will be able to introduce new packages this autumn, joining a bundling trend that its rivals have been driving for years.

BT enjoyed a 4.4% jump in its share price to 135.5p on the news – making it the biggest riser on the FTSE100 index.

BT's competitors, such as Virgin Media and BSkyB, have been able to package together two or more services and sell the bundle for less than the services would cost individually. Previously, because of rules designed to stop the former telecoms monopoly busing a dominant position in the landline market, BT has been able to sell such packages only for a price equal to the sum of the parts.

But Ofcom now believes competition is healthy and BT no longer has "significant market power" in the majority of retail landline markets. The regulator says more than 12m UK households and small businesses use a telecoms provider other than BT, so it is safe to remove one of the last pieces of regulation in the fixed-line market.

"This is an important step in deregulating telecoms, where competition can be relied upon to serve the consumer interest," said Ofcom's chief executive, Ed Richards.

BT Retail's chief executive, Gavin Patterson, said: "It means that BT will be competing on a more level playing field than previously.

It's good news for consumers and businesses, as this will allow BT to offer more targeted discounts on products and services, and more attractive bundles at better prices – something we have been unable to offer widely to date."

Ofcom's decision also means the company will no longer have to inform competitors in advance on its prices.

For customers, it means that when any of their BT contracts come up for renewal they can choose from a wider range of packages.

By fostering greater competition between telecoms providers, Ofcom's decision is also likely to cut prices throughout the market. "We think there might be a bit of a battle of the bundles here, because customers are very interested these days in taking a package," said a BT source.

According to Ofcom's latest figures, in 2008 nearly half (46%) of UK consumers bought a bundle of communication services, up from 29% in 2005. While bundles have increased, calls have become cheaper. The cost of residential calls from a landline has fallen to £21.57 a month in 2008 from £25.04 in 2003.

Source: The Guardian, 15th September, 2009

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