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Times Online July 19, 2006
BT poised to cut prices
By Rhys Blakely BT is expected to announce sweeping changes to residential prices in coming weeks after the telecoms regulator today said it would ease regulations controlling retail pricing for line rental and call charges.
The telecoms giant has waged a long campaign against the controls, imposed in the run-up to its privatisation in 1984 to prevent BT abusing its then near monopolistic position.
Since then, the number of telecoms companies has exploded, with hundreds of low-cost competitors flooding the market. BT today welcomed Ofcom’s decision, with a spokesman calling the old regime "an anomaly, daft in today’s market".
BT currently charges households £11 a month for line rental. Yesterday, BSkyB gave an indication of how price pressures are building in the sector when it said it would launch a rival line rental package for £9 a month in the fourth quarter.
Sky is 38 per cent owned by News Corporation, the parent company of Times Online.
Plans are not finalised, but a BT executive told Times Online that the group intends to review the packages of services it offers customers. Not all prices will fall, but the aggregate effect is expected to be lower costs.
Karen Darby, chief executive of SimplySwitch.com, the price comparison website, said: "Giving BT the power to set its own price will ultimately benefit the customer."
BT is also likely to ultimately cut call charges to compete with cheaper rivals after Ofcom said it would scrap the current four-year-old retail pricing regime at the end of this month.
The group is also under pressure from VoIP (voice over internet protocol) suppliers such as Skype, which is owned by internet giant eBay. Such services allow users who have internet access to make virtually free calls.
Nearly 11 million households and businesses no longer use BT as their phone provider, according to Ofcom. The group has also come under pressure from mobile services, which now account for up to 31 per cent of UK call minutes.
Mr Darby said: "With the rampant advance of new technologies, telecoms companies have to introduce more competitive tariffs just to maintain their market share."
As part of its deal with Ofcom, BT has also agreed to limit increases for its basic line rental product to avoid disadvantaging customers – such as internet users – for whom the line rental accounts for the overwhelming majority of their phone bill.
However, today’s regulatory concessions will not affect BT prices in the broadband market, which is being bombarded by competitors offering "free" high-speed internet access.
Ofcom will not review that market until 1.5 million BT exchanges have been unbundled – a process where rival groups install their own technology. More than 600,000 exchanges have been modified in this way so far, with around 25,000 a week being unbundled.
BT shares were trading marginally lower at midday, down 0.75p at 226p.
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