BT takes first steps towards flat-rates for telephone calls

News Analysis: Tariffs are changing as telecoms world adapts to Net era

BRITISH TELECOM took its first tentative steps yesterday to shift telephone user charges from a metered basis to flat-rate, subscription packages featuring bundles of calls.

Clearly, BT and its cable competitors, NTL and Telewest, still gain too much incremental revenue from metered calls to drop charges altogether. Yet the increasing commoditisation of voice telephone calls means that unit charges will continue to fall, while telephone companies shift their focus to signing up customers to subscription-based, volume discount schemes that seek to capture higher margin mobile calls and e-commerce revenues.

As the traditional telecoms business model changes, BT will aim to rebalance tariffs. It means line rental charges will rise, while calling charges continue to tumble.

From 1 November, for example, a new package called BT Together will offer residential customers line rental for pounds 11.99 per month, including three hours of local calls at weekend rates worth pounds 1.80. Discounts on other standard call prices will also be introduced.

International calls will also become cheaper for BT Together members. Weekend calls to the US will be 10p per minute, down from 14p, while call tariffs to Europe, Australia and New Zealand will also be reduced.

Beginning on 1 October, residential customers will get free call time equivalent to three hours of weekend calls per quarter, worth about pounds 1.80. However, line rental charges will rise by slightly more than 1p a day to pounds 27.77 per quarter.

"We're making a strategic shift toward much simpler pricing," Angus Porter, director of marketing at BT UK, said.

To do that, BT's tariff repackaging will reduce the number of discount schemes. Customers that choose BT Together will automatically be ineligible for all other schemes except Friends and Family. But the latter scheme, BT's most popular with 15 million users, will extend discounts to 10 frequently dialled numbers, including five overseas, from the current five numbers and one overseas.

"It's one of the ways you can charge all-you-can-eat type [tariffs]," said John Tysoe, analyst at WestLB Panmure, commenting on BT Together. He noted that a pounds 1 per quarter line rental hike is advantageous to BT since it boosts recurring revenue. "It bolsters BT's competitive position," said Mr Tysoe.

BT's move comes two days after AT&T, the US long-distance giant, slashed its tariff for calls within North America to a flat rate of 7 cents a minute at any time. Other US long-distance providers such as MCI WorldCom and Sprint offer evening charges as low as 5 cents a minute, but charge more for daytime use.

Alternatively, North American consumers are also being offered all-inclusive packages from local network operators. These combine three-way line rental, unlimited continental long-distance calls and Internet access - all packaged for as little as pounds 30 per month.

BT, of course, has been mandated by Oftel, the telecoms regulator, to reduce prices this year by the retail price index minus 4.5 per cent. Today's cuts will account for around 60 per cent of that obligation; other reductions will be unveiled later this year.

The new packages offer little in the way of savings or better service to Net users - by far the fastest growing part of BT's business. However, BT maintains the cut in local tariffs will let consumers surf the Web for 20 hours for pounds 10, or less than 1p a minute.

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