Virgin Media O2 and Talktalk Telecom Group PLC (LSE:TALK) have overcharged customers by nearly £200mln for voice-only landlines since 2009, alleges consultancy firm Fideres.
Despite an Ofcom investigation prompting BT Group to cut voice-only landline prices by 37% in 2017, smaller rivals have continued to charge customers higher rates, Fideres explained .
TalkTalk alone has charged an estimated £103mln extra when compared to the new BT prices, while Virgin Media and SSE Enterprise gained an additional £48mln each.
“By allowing Talk Talk, Virgin, and other voice-only landline providers to maintain prices approximately 60% above the fair rate shown by BT’s reduction, Ofcom may have tacitly allowed them to overcharge consumers,” Fideres wrote.
“Due to low competition in the voice-only landline market, this overcharge may constitute an abuse of UK competition law.”
BT, the UK’s largest landline-only provider with 2.3mln customers, cut prices drastically, alongside the Post Office in 2017, but rivals failed to follow suit.
Fideres suggested the low level of customer switching between broadband providers meant there was little incentive for companies to lower prices.
“Normally, a 37% price reduction by a leading firm would force firms providing the same product to lower prices,” Fideres managing director Chris Pike explained.
“But here high barriers to substitution and low consumer engagement seem to have allowed providers to maintain high prices without losing customers.”