Supermarket giant Tesco is expanding its telecoms portfolio into the Internet telephony market, the company announced on Thursday.
Tesco will target customers with a VoIP servioce, which it plans to start offering from over 350 stores over the coming months.
The company claims calls rates will be "slashed to rock-bottom prices compared to existing fixed line services."
However, Tesco's landline prices do not appear to compare favourably with VoIP provider Skype. Calls to UK landlines using Tesco's VoIP product will cost 2p per minute, while Skype customers are currently charged 1.2p per minute when they call a UK landlines.
Mobiles are, however, a different story. Skype charges users 14.3p per minute to all networks, while Tesco offers rates of 10p.
Tesco claimed to not be in competition with Skype, and said it was responding to demand from its customers.
"Our focus isn't to compete with Skype," said Alex Freudmann, commercial manager for Tesco Telecoms. "We're launching the service because our customers expressed a need. Our customers wanted a simple pricing structure. Our VoIP pricing is in whole pennies — the halfpenny doesn't exist any more — and there's one call rate at all times."
"We focused very heavily on giving customers what they asked for, and kept the installation and the tariff simple, and good value," said Freudmann.
Because Tesco's VoIP traffic will travel over the public Internet, it won't be able to guarantee the quality of service. However, the company claims that the quality will be better than traditional fixed line telephony, because of the data compression rates it uses.
"Assuming you have a reasonable phone, the sound quality is better than a landline. We tested the service in customer test groups, and had favourable results. We minimised the data feed — it's compressed as much as possible. It even works very well over narrowband," said Freudmann.
To access the service consumers will need to buy a pack from Tesco store that will cost £19.97, including a £5 call voucher and a USB handset. The pack also gives the user a phone number that non-VoIP users can call them on.
Tesco is also investigating using a VoIP service internally.