BT introduces price cuts

Millions of BT customers will see changes in their phone bills, starting Tuesday, after official caps on what the incumbent charges were abolished by the UK watchdog, Ofcom.

The regulator removed the price controls after 22 years ruling that competition in the UK fixed-line telephony market is sufficient to allow BT to compete fairly with its competitors. The price cuts do not affect its broadband prices which are still subject to regulation.

While BT is dropping the price of two of its top packages, offering free evening and weekend landline calls on an 18 month contract, the operator is also bringing in a 3p call set-up fee which will hit its 12.6 million Option 1 residential customers. The fee replaces the existing 5.5p minimum call charge and will be added to all option one calls, regardless of how long they last.

The group is also bringing in per-minute call charges to replace per-second charges, a move which has resulted in claims that Option 1 customers will be hit in the pocket.

But a BT spokesman reacted by saying that commentators were making the mistake of looking at the new prices from a historical perspective, “when really we have freshened all the deals up and you have to look at these in totality.

“A large proportion of our customers will benefit by selecting Option 2 or 3, but we still think Option 1 is a good deal.”

The spokesman said that the operator has also slashed the cost of calls to 0845 and 0870 numbers – which account for around a quarter of all call time – to below half the price of competitors.

BT is also aiming to simplify some of its tariffs. From October, it will introduce just three rates for calls from landlines to mobiles, replacing the previous twenty. Rates will be 13p per minute during the daytime, 8p during the evenings, and 5p during the weekend.

Ovum analyst Mike Cansfield commented that BT’s price advantage following these cuts will be short lived, as rivals are likely to retaliate quickly. But BT has to try and defend its traditional consumer call revenues. “By stirring up the pricing mixer its aim will be to hang on to customers (through contracts) and so slow the decline in revenues in this segment. In its full-year results, BT Consumer revenues fell by 5.4 per cent (£303m).”