Vodafone – the mobile phone giant that has recently turned its hand to broadband – has said it will scrap line rental charges in a UK industry first.
Both new and upgrading home broadband customers in the UK will not be billed the £18 monthly charge if they commit to an 18-month contract.
Vodafone came late to the broadband party in the UK, only launching its fixed-line service in October. Customers that sign up for an 18-month contract will still get a landline connection with prices starting at £22 a month.
The decision to scrap line rental fees has been welcomed by analysts and investors, seen as giving Vodafone a first mover advantage in the sector. Shares in Vodafone were up by 0.3 per cent by the start of the afternoon session.
Paolo Pescatore, director of multiplay at CCS Insight, said:
Wow, this move clearly underlines Vodafone’s commitment to the UK and especially its intentions for the fixed-line market.
While others have tinkered with line rental pricing, we believe this is the first time a provider has decided to ditch it altogether. This move will go some way to provide customers with clear and transparent pricing and lays down the gauntlet for others who will be forced to go down this route.
However, Vodafone’s lack of content still represents a huge headache for the company as all of its rivals are bundling entertainment, movies and sports with their broadband deals.
The fiercely competitive broadband market, which has seen TalkTalk, Sky, Vodafone, and BT regularly come to blows over regulatory and infrastructure decisions, has been accused of misleading customers with confusing pricing structures.
Earlier this year TalkTalk – victim of a high profile data leak last year – announced it will stop separating out line rental from broadband prices in the Autumn.
Some analysts were more sceptical of the move however, claiming it is costs being merged not removed. Ewan Taylor-Gibson, broadband expert at uSwitch.com, said:
To be clear, Vodafone isn’t really abolishing line rental charges, it’s simply combining the charge into its fibre pricing.
This is because broadband providers are under pressure from government and Ofcom to change advertised pricing so customers see a cost per month that includes line rental, so Vodafone is stealing a march on its rivals.
It won’t be long before this way of pricing becomes the norm across the whole broadband market – although Vodafone should get a pat on the back for being the first to take the plunge.
In May the Advertising Standards Authority (ASA) announced it would be cracking down on misleading broadband price claims in internet service provider (ISP) adverts.
The changes, which will come into force on 31 October 2016, force companies to include line rental in the final price shown to customers.
Earlier this year the ASA found many customers were confused by the way prices were presented, with only 23 per cent able to correctly identify the price after viewing the broadband ad.
The likes of BT and Sky are expected to bring in the changes ahead of the October deadline.
A BT spokesperson said:
BT and other ISPs across industry will be introducing broadband prices that include line rental shortly.
Vodafone has not abolished line rental charges, just combined the prices.
While Vodafone is the first national ISP to scrap separate line rental charges, it is possible to get online at home without having a fixed line installed at all.
Relish – which uses 4G mobile networks to connect homes with broadband-like internet speeds – was set up in 2014 and has racked up heavy losses due to widespread marketing campaigns around London.
Relish, owned by a firm called UK Broadband, uses a network of masts around inner London to get customers online. Home customers pay £20 per month for the service and businesses £25, with no line rental.
Bridget Lorimer, head of marketing at Relish, said of Vodafone's move:
This boils down to one thing – transparency. It’s completely unacceptable that any ISPs continue to mislead consumers with confusing pricing structures.
We welcome this belated move from Vodafone, conveniently timed with the impending ASA ruling.