The new firms, known as "resellers," are fast becoming the bucket shops of the telephone industry. They make money by buying up bulk international call capacity from network operators such as BT and AT&T of the US at cost price and packing as many customers as possible onto the lines.
In typical cases, resale companies can slash the price of overseas calls by up to half. Swiftcall, the Dublin-based resale firm, offers calls to the US for as little as 10p a minute, compared with BT's cheapest off- peak rate of 26.1p, though this excludes extra discounts from schemes such as its Friends and Family promotion.
With sales of some $3.3bn (pounds 1.99bn), resellers currently account for just over 4 per cent of the $79bn global international phone call market. However, according to the report by Ovum, the telecommunications research group, the world-wide resale market will soar to $31bn by 2005, giving the new companies 30 per cent of international call business.
In the UK the challenge looks set to be particularly severe, with revenues projected to surge from pounds 171m this year to about pounds 1.39bn in the next 10 years.
BT is already feeling the impact of the resellers, and last week reported a 4.6 per cent fall in revenues from international calls between April and September, to pounds 941m. The drop was entirely due to price competition, with the raw volume of calls actually increasing by 8 per cent.
Although BT has cut more than pounds 200m off its international call prices this year the research suggests it will have to slash charges much further to compete.
Stephen Young, the report's author, explained: "BT will sell less international calls to retail customers but more to a whole new set of wholesale customers who buy up the capacity and sell it to the end-user."
There are already some 90 resale firms competing for business in the UK. One of them, ACC, has seen sales mushroom from pounds 25m to pounds 60m since last year alone. Rob Hunt, ACC's marketing director, explained: "We can make profits because we buy call time in bulk from BT and have lower overheads because we're a smaller company."
Though the UK market has been open to resellers since the start of the decade, the survey says the business will explode further when other European countries deregulate their markets in 1998. Already, resale companies are finding ways of getting round controls.
"The regulators are no longer capable of keeping a grip on the market because it's becoming explosive and volatile. You cannot stand in the way of it," said Mr Young.
The biggest boom in reselling is in the US, where the new operators are already eating into higher-value services offered by the likes of AT&T or MCI. The world's largest resale company, USA Global Link, has seen turnover grow from $30m in 1993 to $176m last year.
Holland Taylor, the chief executive, argues the resale business could seriously hit BT and MCI when the two firms merge. "The dinosaurs see comfort by merging and getting bigger. But this industry is changing overnight and you can't judge the future by what happened in the past," he said.Reuse content