BT to raise prices for line rental, calls to landlines

The telecoms provider will hike its line rental prices by the same amount as the now-scrapped next-generation broadband levy, but also make calls to mobiles cheaper

BT is to raise its line rental fees by 50p a month, the same amount that was to have been charged for Labour's now-scrapped next-generation broadband levy.

The hike was announced on Monday, along with a severe price rise for non-inclusive daytime calls to landlines, which will go up almost 13 times from 0.5p to 6.4p per minute. The set-up fee for each call will also go up from 1p to 10.9p, and the call return charge will go up from 4.2p to 16.5p. All these rises will take place from 1 October.

By way of comparison, a three-minute call between landline phones will cost 2.5p before 1 October, and 30.1p afterwards.

However, BT also told ZDNet UK that it will soon test out adding calls to mobiles into standard call packages. At the moment, such calls are charged separately and at higher cost, so the move would make it cheaper for most people to phone someone on a mobile phone from a landline.

"The calling patterns of customers means the impact of the daytime rate and set-up fee changes will be minimal," BT said in its statement on Monday. "More than half our customers are on inclusive calling packages and don't pay charges for most calls."

The previous government had proposed a 50p-per-month levy on each copper broadband connection, in order to subsidise the roll-out of fast, fibre-based broadband to rural areas deemed insufficiently profitable by the private sector. The Tories always opposed the scheme, and it was shelved by Labour shortly before the May election.

BT said that the fact it is raising its line rental charges by the same amount as the scrapped levy was "a coincidence". "Basically, it's to ensure that we can offer discounts and competitive pricing going forward," a company spokesman told ZDNet UK. "It's so we can stay competitive in these recessionary times."

The telco will run a limited offer until 29 October, where subscribers can pay for their next year's line rental upfront, in exchange for an annual saving of up to £45.60.

BT told ZDNet UK that it intends to lower its prices for calling mobiles in response to looming cuts in the UK's mobile termination rates (MTRs). The company was a vocal campaigner for the MTR cuts, which make it cheaper for a fixed or mobile operator to connect their customer's calls to a mobile operator's customers.

"We're planning to introduce all-you-can-eat packages," BT's spokesman said. "We will shortly be announcing trials of plans that include calls to mobiles."

The analyst house Ovum pointed out that BT's price hikes come "hot on the heels of a recently agreed pay deal with the CWU, and a hike in the wholesale price it pays for its sport content for BT Vision".

"One of the headline stories for BT last financial year was its ability to reduce costs and thereby improve margins, particularly at BT Retail," Ovum analyst Mark Giles said in a statement on Monday. "This latest move is clearly designed to help it maintain this momentum; however, it should be wary of forcing customers not currently bound by a contract to pay more for their service, as this could well drive up churn levels."