Line Rental, Why ?

System

I think you are mistaken, topherxp. Most sellers of services have fixed costs which are more-or-less independent of usage, and variable costs which are more-or-less proportional to usage. How they charge their customers depends on custom and competition. Electricity and gas tariffs always used to include a daily fixed charge; now they often don't. Shops never (as far as I know) make an 'aisle rental' charge independent of how much you buy.

The mobile networks offer either (a) a (hefty) monthly charge 'including' lots of calls; or (b) PAYG, on which you pay nothing if you make no calls. (a) is win-win for the mobile companies, because they know all their fixed costs are covered, and they charge even more if the customer exceeeds the 'included' calls. PAYG is usually win for them too, because most PAYG customers end up paying even more than they would if they had a good enough credit rating to get a monthly fee 'including' x minutes. On the other hand, PAYG customers who make no or very few calls are, arguably, subsidised by the £35-a-month dudes, and the mugs who are paying £50 a month PAYG.

Landline providers could offer PAYG tariffs without 'line rental' if they chose to. But they could reasonably charge more per call than they charge customers who pay a fixed monthly fee.

Ypaymore

YoungNick wrote: »

Landline providers could offer PAYG tariffs without 'line rental' if they chose to.

Not while Ofcom insist they stick to USC.

System

Nothing in the USC would prevent BT (or Kingston) from offering a 'no line rental' calling plan, provided they offered it to anyone in the UK (or Hull) on the same terms. However, they'd lose money on such a plan, if lots of money-saving experts took them up on it and then routed most of their calls via 18185 etc, because on these calls BT and Kingston would be collecting only the (tiny) origination charge.

bunking_off

Quite.

Line rental is about provision and maintenance of the line, and most of that cost falls in the copper pair to the local exchange. This is a natural monopoly for this (leaving cable TV and radio to one side), hence the creation of Openreach which is heavily regulated to do this. Talking about "BT" line rental is a misnomer because you could choose from a plethora of suppliers for your line rental...it's just that they'd need to purchase from Openreach...it's not surprising that retail pricing converges on the wholesale input price (and Virgin is similar, because they charge what they can get away with, which is what everyone else charges).

At a service provision level you could have low rental and high variable charges, but as you've got the option to choose a 3rd party to route your calls, it would quickly bankrupt the line provider. This is different from the other examples cited

...in electricity you can't have no standing charge then use the units from a different electricity provider which reflect you having paid their standing charge

...in food retailing so far as I can see, Tesco aren't forced to open up their shelf space to Sainsbury's to use.

So it's quite ok to for a business to spread its fixed costs onto variable ones so long as it's got a captive audience....that's not the case with line rental.

The other point which appears to have been missed is that for BT lines, line rental for voice actually covers a lot of the fixed costs for broadband. Broadband pricing is based on the premise that the copper's already been paid for. There's increasing tension on this, in that quite a few people want broadband with no voice nowadays. To put it right you'd need to have a bill for copper provision & maintenance, then voice rental and broadband rental separately on top of that. In this context the voice rental would then become trivially small, indeed chances are you wouldn't be charged. The issue, though, is who would bill you the "copper" element...particularly if you go through a transition of taking voice, then voice & broadband, then broadband only using separate providers...as you changed the entity charging you for the copper would have to change. It's for this reason that to date the telecoms industry has put it on the "too difficult" pile and left voice line rental covering the cost of the copper.

The bottom line you can't get away from, though, is that telecoms is essentially a fixed cost business. The variable costs of carrying calls (especially out of busy hour) is low once the network has been provided. Hence line rental is high. And given most of line rental is copper maintenance, that doesn't particularly fall with new technology hence don't expect it to reduce any time soon.