House of Commons - Public Accounts

Select Committee on Public Accounts Eleventh Report

2 Consumers' choices

7. Consumers in the telecommunications market can choose:

a) which operator will provide the fixed-line into their home;

b) which tariff to have from that operator;

c) whether to use an indirect access supplier; and

d) for which types of calls will they use an indirect access operator.

8. A fixed-line consumer can choose between BT Group plc (Kingston Communications in the Hull area) and one of two cable companies, NTL Group or Telewest Communications plc (whose networks cover separate areas and are available to about 60% of households).[13] The challenge to the consumer is that each provider offers different tariffs, tariff structures and discounts, and if none of these tariffs are suitable there is a further choice of over 200 different indirect access operators.[14]

9. In a competitive market, with full information, the choice of service provider and tariff will be influenced by quality of service and price, together with the consumer's 'call profile' (the number, type, duration and timing of calls made). Some providers do not, as a matter of course, offer enough information on the face of the bill to identify call profile and inform consumer choice, so the consumer must make estimates. If these estimates are incorrect, the consumer cannot change their tariff choice retrospectively. And if the consumer could identify the profile, it is probable that the time taken to calculate the correct tariff from all the options available would outweigh any savings made.

10. We suggested to Oftel that it would help consumers if telephone bills showed the numbers called most frequently, in both time and cost. This would help consumers identify their call profile, and would help those with a BT line decide which numbers to include on their 'Friends and Family' discount.[15] We also asked Oftel if it could have required BT to look at the type of calls made during the billing period and apply its best tariff to that customer retrospectively. Oftel did not think it had the power to do this as it was unlikely that the company would have been in breach of its licence conditions or engaging in anti-competitive behaviour.[16]

11. Even with the complexity in the market, some people can take simple steps to minimise their expenditure by:

Buying a telephone handset

12. Three million consumers who rent a handset from BT would probably be better off buying one. The C&AG's Report, published in July 2003, found that a basic unbranded telephone could be purchased on the high street for £7, compared with a rental charge of £18 per year for a telephone with similar features.[17] In October 2003 Oftel directed BT to reduce its prices for handset rental by 25% over two years.[18] Currently most consumers pay £16-£20 per year depending on the type of handset, which would reduce to £12-£15, and produce a total saving to consumers of about £11 million.[19]

Taking advantage of the Light User Scheme

13. BT offers a Light User Scheme which 1.45 million out of 4 million eligible customers used as at September 2002.[20] Oftel could not explain why the uptake on this scheme had not been higher. Some of the poorest customers who are eligible, and could save money, have not done so.[21]

Using indirect access operators for international calls

14. Customers on BT's Standard tariff who make international calls could save, on average, in the region of 50% by using an indirect access operator instead.[22] More substantial savings are available to customers calling the more popular countries as shown in Figure 1. Setting up an indirect access account is relatively simple, but many consumers do not do so, perhaps because of a lack of awareness; the C&AG found that over three out of four people could not name a single indirect access operator.[23] Figure 1: Cost per minute of calling a selection of countries at the weekend

Tariff France Germany Ireland New Zealand USA

BT Standard 23p 23p 18p 39p 21p

BT Together 9p 9p 9p 17p 9p

BT Together International (£1 per month surcharge) 5p 5p 5p 5p 5p

Representative indirect access operator 4p 3p 4p 4p 3p

Savings over BT's Standard rate if a representative indirect access operator is used 83% 87% 78% 90% 86%