BT’s dominance of the UK home telephone is coming under fresh pressure as the phone call market becomes the most liberal in Europe. Previously, their pricing levels have had to be agreed in advance with the UK regulator Ofcom, but with it understood that this is going to be lifted soon, price cuts are expected.
In a sign that the gloves are well and truly off, Tesco has unleashed a price-busting Voice over IP (VoIP) package designed to lure customers from the incumbent operator.
It’s further proof (if any were needed) that VoIP continues to shake things up in the voice phone market.
The Tesco package will be marketed at just under £20 and will include a ‘normal’ phone handset that plugs in to a broadband-enabled PC’s USB port, and the software need to drive it. Calls will be made at a fraction of the current cost.
Many other companies continue to pressure BT. Talk-Talk, the landline phone service by The Carphone Warehouse, has already consolidated two of the traditional landline competitors and it’s likely that Sky would also welcome call revenue via its recent Easynet acquisition.
Pressure is also coming from outside the UK. US giant AOL has BT in its sights with a programme to exploit the Local Loop Unbundling (LLU) agreement BT made with Ofcom, which permits AOL and others to house high tech Voice over IP equipment at exchanges throughout the country.
Technical-savvy Skype callers have for a long time taken advantage of VoIP calling to obtain free or cheap calls.
The danger for BT is that the trickle of the public away from its traditional services over recent years could become a torrent, as more content, including broadband TV starts to be delivered by IP, BT could lose their in-built advantage as the default delivery gateway to UK homes.
Is all of this price cutting good news for British consumers? Well, certainly lower call prices will benefit the majority of UK call makers, but there is a question mark in the long run. It could bring mixed blessings for the UK’s telecoms infrastructure as BT tries to cut costs and investment to ensure that its institutional shareholders remain happy as they operate on slimmer margins.