BT buoyant after Ofcom lifts retail price caps

Price controls on BT Retail are being lifted, 22 years after the telecoms giant was privatised.

This regulation, which restricted what BT could charge for calls and line rental, was intended to make it easier for new entrants to gain a foothold in the UK's telephony market, a task the regulator now says is complete.

According to Ofcom on Wednesday: "The removal of retail price controls is enabled by, and reflects, the rapid growth of competition and continued reductions in the cost of phone services for customers."

Ofcom said evidence BT was no longer a monopoly could be found in the "more than 10.7 million households and small businesses now [using] providers other than BT Group plc for their phone calls", and claimed the UK now had "some of the cheapest phone costs in the world".

Ofcom also noted the competitive impact of technologies such as internet telephony (VoIP), which it said was already used "actively" by more than half a million UK households and small businesses, and mobile phones, which now account for 31 per cent of all voice minutes used in the UK (up from five per cent 10 years ago).

BT Retail was quick to welcome the decision, with chief executive Ian Livingston promising "a freer BT will deliver even better value and innovation for our residential customers".

Livingston added: "We will now look at how we can simplify our pricing structures and make them more user-friendly," although it remains to be seen what this entails.

A spokesman for BT Retail said its prices could go up or down as a result of the deregulation. He also suggested BT's Together packages could be under review.

The spokesman added: "What's changing is that BT can now act as any other sensible company and can offer packages which we think our customers are going to like."

Explaining that BT Retail has had to refer all its price changes to Ofcom for approval, the spokesman recalled "the bizarre situation when we had to tell our competitors in advance what we were about to do, thereby negating the advantages of us implementing changes".

One analyst agreed deregulation would give BT Retail "more room to manoeuvre both up and down".

Tony Lock, European research director for the Sageza Group, said on Wednesday: "You would hope that commercial pressures would stop any rises kicking in that would not be justified but you might see some increases in some areas with decreases in others."

He added: "I suspect that even BT doesn't know where it's going to go. It's a learning process for them, and will also be a learning process for the customers. Customers need to get smarter so that they take appropriate action if they don't like what they are offered."

BT Retail will be formally released from its price controls on 1 August.

David Meyer writes for ZDNet UK