This piece first appeared in The Daily Telegraph on 26 June 1999
The text here may not be identical to the published text

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People who spend a lot on their domestic phone bill can spend a lot less by changing from British Telecommunications to one of the dozens of new companies which offer good telephone connections at much lower prices. But BT still has 84% of the domestic telephone market after nearly 13 years of competition. Compare that with British Gas which has lost nearly one in four of its customers in just three years of a free market. Andy Hedges, Managing Director of one of BT's main rivals First Telecom, says BT is confusing its customers.

"There's been a plethora of campaigns over the last 18 months. BT's international market share has taken a dive and it is trying to stop it with confusion marketing and aggressive price comparisons. It has a plethora of discount schemes using confusion tactics. The prices they quote like 12p a minute to the USA or 45p a minute to India are attractive but you have to jump through hoops to get those rates - most customers pay far more."

BT does still have a complex system of tariffs - call charges depend not just on destination but on the time of day and the day of the week. Savings can be made by paying £24 a year for Premierline - 15% off most calls and 5% off calls to mobiles - and by nominating a dozen numbers as 'friends and family' for another 10% off. But BT spokesman Tony Henderson denies it is deliberately confusing. "People like to have control over where the discount is applied."

Most of the newer competitors offer simplicity as well as lower prices - one rate to one destination at any time. And they tend to concentrate on savings on international calls where the biggest profits are. Another factor which keeps people with BT is that is still quite fiddly to change from BT. Most people keep their BT line and usually continue to make local calls through BT. Their international calls - and with some operators their national and mobile calls which bypass BT. But that means so they still get a BT bill as well. Access to alternative phone companies is gained by dialing a four digit code before the number, though well organised callers add it to the automatic dialler on their handset.

There are other dangers with the new phone companies. Most of them demand money up front. You pay a minimum of around £20 and then make calls until it runs out. Then it has to be topped up. That system works well for people who want to restrict their spending. Those who are not so worried can use a direct debit or credit card authority so the company will top up the account to, say, £50 every time it falls below £5. That means the money will never run out during a call. But paying up front does bring risks. Last November a carrier called First Choice went bust taking down with it the deposits paid by its customers.

But for those with the determination to see it through, significant savings can be made. A five minute daytime call to the USA will cost just over £1 using BT even with its Premierline discount (which costs £24 a year to join). But with OneTel, the same call costs just 30p. Competition and the huge volume of calls made across the Atlantic mean that it costs more to cross the channel by phone than the Atlantic. It costs slightly less to call Ireland than the USA through BT, but savings 50% can still be made on an evening call to Ireland using First Telecom's FirstPhone tariff - 42p as against the reduced BT price of 84p. On international calls almost any of the alternatives will save money compared to BT at any time of the day or night.

It can also be cheaper to call within the UK - One Tel offers a simple 4p a minute anywhere tariff. That is of course dearer than the BT charge which can be under 1p a minute at cheap rates. But One Tel is cheaper for making national daytime calls within the UK. But the one operator who is aiming at the domestic market is First Telecom with its Easy Phone tariff. This does offer big savings against BT on many calls within the UK and to mobiles - but the savings on international routes are not so great. The cost of calling to a mobile has recently been heavily cut by BT - partly in response to demands by the Government phone watchdog Oftel but also due to BT buying a majority stake in Cellnet - or BT Cellnet as it is now known. Calls to a Cellnet number in the evening are just 2p a minute - compared to 8p to call an Orange phone. It is less likely that an alternative to BT will offer cheaper calls to a mobile phone, though First Telecom Easy Phone tariff does try to match it. Otherwise, you need a rate card and a calculator to decide which company to send your call through for the cheapest rate. Finally, the rates shown in the table for five minute calls do show big savings against BT. But the savings will generally be slightly smaller in real life. BT charges per second - most of the competitors charge per 15, 30 or even 60 seconds. That means that a call lasting just 61secs can be charged as a 2 minute call - often wiping out any savings.

26 June 1999

e-mail Paul Lewis on paul@paullewis.co.uk