BT faces new competitive threat as Oftel demands line rental access for rivals

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A raft of other telecoms providers are lining up to steal BT's residential customers after the industry watchdog Oftel yesterday unveiled a package of new measures designed to enable rival companies to offer the same service as BT.

Under existing rules, consumers who choose to pay for their calls through another operator receive two separate phone bills since they still have to pay BT's monthly line rental.

Oftel's new scheme means consumers will be able, for the first time, to pay for both line rental and calls from another telecoms operator under one bill. The regulator expects rival operators, such as Centrica and possibly other utilities including Powergen, to start offering consumers a "one bill" telecoms service from October.

Ian El-Mokadem, managing director of Centrica's telecommunications business, said: "One of the things that has annoyed customers most is having two bills and we are delighted to see this being addressed."

Oftel yesterday ordered BT to offer a new wholesale line rental product to rivals on the same terms that it provides the product to its own consumer business, BT Retail.

David Edmonds, the director general of telecommunications, said the move could see rivals start offering new tariffs such as flat rate charges for unlimited calls or abolishing line rental altogether and recouping that fee through call charges.

Oftel has fixed the charge for wholesale line rental at £28 a quarter. The fee is slightly below BT's current £31.75 quarterly charge.

In addition, Oftel said it planned to continue levying price controls on BT to ensure the bills of its lowest-spending customers – 80 per cent of them – did not rise. That new control, which replaces the existing control of RPI minus 4.5 per cent, comes into play at the beginning of August and means customers' bills will be frozen at current rates.

However, the regulator said the control would be revised to one which pegged prices to the rate of inflation once the new wholesale line rental product had been widely taken-up. It plans to review the market again in 2004 and will withdraw all controls if its believes the market is "truly competitive".

A spokesman for BT said yesterday that while the telecoms giant welcomed the "overall direction" toward removing the controls, it remained "disappointed" with the slow pace of their abolition. BT plans to respond to the new measures by the end of July.

In addition, Oftel has ordered BT to increase the number of people eligible for a reduction in their line rental charge on its "light user scheme".

"These measures represent a significant move away from traditional price controls and will lead to their total abolition once the market is effectively competitive," Mr Edmonds said. Separately, BT slashed its call charges on public pay-phones from 11p a minute to 2p a minute for local, evening and weekend calls for three months. Paul Hendron, director of BT Payphones, said the move was a "reminder" to those "who aren't using BT payphones as much as they used to" that they are still "fantastic" value for money.

The 2p-a-minute promotion, which lasts until 13 September, means customers will receive 10 minutes of talk time compared with the usual one minute and 50 seconds.