BT kicks off phone price war

BT announced on Wednesday that it is cutting the cost of phone calls, in an attempt to ward off rival operators who claim to offer cheaper services.

At a time when supermarket chains are joining the throng of companies offering phone services, the UK's incumbent telco has responded by launching three new tariffs for its ten million BT Together customers. These are cheaper than its currrent offerings and eliminate the pricing distinction between local and national calls.

Phone calls are also a key part of the "triple play" -- along with TV and Internet services -- offered by cable companies. BT says it has kept a stable market share in the fixed-line telephony market for the last two years, and it is crucial for the telco to maintain a grip on this sector if it is to reassure City investors about its long-term profitability at a time when it is investing in the rollout of ADSL.

Under Option 1, called the 6p hour plan, customers will pay 6p for the first hour for all evening and weekend calls and 3p per minute for daytime weekday calls, on top of a £11.50 monthly rental fee.

Option 2, called the evening and weekend plan, has a monthly rental charge of £17.40 and gives the first hour of all evening and weekend calls for free, with daytime weekday calls also costing 3p per minute. Option 3, the anytime plan, gives the first hour of all UK calls for free. Its monthly rental is £28.50.

These new tariffs will come into effect on 1 June this year.

"We are determined to be competitive and build on our position as the consumer champion in fixed-line telephony. We have kept our market share constant for the past two years in the face of increasing competition. This radical move provides the simplicity and lower charges that will give customers stronger reasons than ever to choose BT over any other company in the market," said Angus Porter, managing director of BT Retail's consumer division, in a statement.

"Claims by some competitors of savings over BT are often just plain misleading, as they are based on comparisons with our standard rate, which is only for customers for whom it would not be economic to be on a fixed call package. Today's changes make it simpler for many customers to spot the real deal," Porter added.

BT says that with these new tariffs it will be considerably cheaper than rivals such as Telewest, NTL and One.Tel.

Currently, BT Together customers pay 3p per minute for daytime local calls and 4p per minute for daytime national calls. Some existing tariffs do include unlimited calls at evenings and weekends, but the standard BT Together tariff charges 2p per minute for national evening and weekend calls.

Telewest, though, played down BT's new pricing structure and suggested the telco wasn't being totally honest with its comparisons.

"This is yet another example of BT waking from its cosy slumber and attempting to follow our lead, but they are hardly ringing the changes with this announcement," said Gavin Patterson, managing director of Telewest Broadband.

"It accuses competitor's pricing claims of being 'plain misleading' because they're based on standard rate comparisons, yet it has done exactly the same today. Our Talk Unlimited, Talk Evenings & Weekends and Talk International packages, which BT has conveniently overlooked, still offer phone users genuine savings," Patterson added.

"By BT's own admittance, consumers are clamouring for lower, less complicated call charges and that's exactly what we've been offering for nearly two years now. We've got over 360,000 customers on unlimited packages who know they've dialled the best deal."

"By not comparing like for like, BT is simply clouding the issue further and continuing to offer consumers second best."

Telewest launched an unlimited local and national tariff costing £26 per month back in May 2001. NTL charges £25 per month for its unlimited local and national tariff.

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