Ofcom deregulates retail telecoms market

Ofcom has removed one of the last pieces of regulation in the retail fixed-line telephone market.

This will have the effect of allowing BT to offer discounted bundles of services including traditional fixed line calls for the first time. Bundles might include landlines, broadband, digital TV and other services.

The decision to deregulate, 25 years after BT was privatised, was taken after BT was judged to no longer have ‘significant market power’ in the majority of retail landline markets in the UK. Ofcom has concluded that other providers, such as Virgin Media, BSkyB and TalkTalk, provide effective competition to BT in this part of the market.

The move follows a major piece of deregulation in 2006 when Ofcom removed the regulations on how much BT could charge its customers for phone calls.

The trigger for deregulation was an increase in competition in the market. Today, more than 12 million UK households and small businesses use a telecoms provider other than BT. The growth in competition was spurred by the Undertakings that Ofcom agreed with BT Group in September 2005 which required BT to set up a new division, called Openreach, to provide services to its rivals on equal terms.

Besides increasing choice, competition has also delivered lower prices. Ofcom’s latest Communications Market Report shows that the cost of residential calls from a landline has come down from £25.04 in 2003 to £21.57 a month in 2008.

Many communications providers offer discounts to consumers when they buy two or more services. According to Ofcom’s latest figures, in 2008 nearly half (46%) of UK consumers bought a bundle of communication services of two or more services, up from 29% in 2005. Some 47% of people said they intended to buy a bundle of services in the future.

Today’s decision, which will affect all parts of the UK (except Hull), will benefit consumers by helping to increase competition in the delivery of these bundled services.

Ofcom’s Chief Executive, Ed Richards said: “This is an important step in deregulating telecoms where competition can be relied upon to serve the consumer interest.”

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