BT concession to competitors could transform telecoms market

British Telecom is to open its phone network to full competition for the first time, giving much greater opportunities to new operators and established rivals.

Chris Godsmark, Business Correspondent, reports on proposals which could fuel the transformation of the telecommunications market.

In a letter sent to some 20 rival telecom operators recently, BT revealed plans for a new service that would see the company relinquish the use of its brand name for local calls for the first time.

BT has told the industry that it intends to start technical trials of the service, called Calls and Access, next month with the aim of including around 2,000 households in the South-east in the experiment. Executives have already given the go-ahead for a full national roll-out early next year. Under the plans, other companies would pay to use all or part of BT's national and local networks at wholesale rates and then resell the product to consumers using their own brand names. For the first time in the UK these customers would no longer receive a BT bill for their line rental or calls on the company's local network, even though the household had not technically switched supplier.

Under the current regime, phone customers who only have access to a BT line can choose to make long-distance calls on alternative networks such as the former Mercury service of Cable & Wireless. But they continue to receive a BT bill for line rental and local calls, unless another company, such as a cable operator, builds an alternative connection to their door.

In the letter BT said it would charge service providers 20 per cent less for calls than its current standard tariff. But cost of line rental, of pounds 38.50 excluding VAT, would be substantially higher than the pounds 22.65 paid by residential customers and also above the pounds 35.84 for businesses. There would also be a one-off charge of pounds 8.50 for taking over a BT exchange line.

The letter said call prices could come down in the national roll-out by a further 10 per cent, offering a total reduction of 30 per cent over BT rates, but with higher line rental charges. "Retail connection is not currently economic for BT and we anticipate setting a higher price for full launch to reflect our real costs. There will however be a further reduction in call prices to align prices more closely with the cost structure," said the letter.

The move to open the BT network to the so-called "resellers" is likely to attract new companies into the phone market. The cost structure would be more attractive to homes with higher bills, which make more long-distance and international calls.

One possibility is that financial services groups, the big supermarket chains or Internet access companies could all offer a mainstream phone product.