BT responding to pressure by regulator over high charges

THOUSANDS of BT's best residential customers are receiving letters - either with this quarter's bills or by targeted mailing - inviting them to join Option 15, a scheme to cut the cost of direct dial calls by 10 per cent in return for a standard pounds 4 quarterly fee.

The move is the latest symptom of an increasingly competitive telecoms market, as well as a strict regulatory regime enforced by Oftel. BT must abide by a pricing formula agreed with Oftel, which requires its basket of prices to fall in real terms by 6.25 per cent this year, and a further 7.5 per cent in the year beginning July.

A spokeswoman for Oftel said: 'The control formula is to mimic competition, which there isn't particularly in the domestic market as yet. We hope that as competition comes in - for example from the cable networks - it will do the job for Oftel.'

The advent of Mercury has cut prices significantly for heavy users. Mercury claims that there are savings of an average of 35 per cent on long-distance calls, and 20 per cent on international calls, in the economy period.

Significant savings can be made primarily because Mercury charges by the second, subject to a 3p minimum charge, compared with BT's charge per unit, normally 4.2p each. Mercury is available on subscription for an pounds 11.75 subscription fee.

Mercury has introduced its own frequent-caller scheme, bringing a further average saving of 20 per cent. To belong to this programme costs a quarterly fee of pounds 5.88, and payments must be authorised by direct debit. Mercury has calculated that the deal is worthwhile for customers who spend more than pounds 35 a quarter on long-distance and international calls.

Many areas of Britain now have a further cost-saving option - cable television networks. The first operator to provide an independent domestic and business telephone exchange as well as cable television was Diamond Cable, based in Nottingham.

The system connects with both the BT and Mercury national and international services, and Diamond claims it is 15 to 20 per cent cheaper for an average BT residential user. There is no connection fee in targeted sales areas, but there is a monthly rental charge of pounds 7.64 - almost identical to BT's.

Unlike the case with Mercury, cable customers do not need to maintain their BT connection. Other cable television companies have different pricing structures, while some have yet to arrange a phone service.

This plethora of choice can be difficult to unravel. Rob Williams, a social worker, and Phillipa Pratty, a teacher, have found it difficult to decide whether to switch to one of BT's competitors for their long-distance calls. Mr Williams said: 'We thought about using Mercury, but the information about price comparisons is not presented very easily.'

As the table illustrates, the couple would gain by using Mercury or Diamond Cable.

----------------------------------------------------------------- Table: HOW THE CHARGES COMPARE ----------------------------------------------------------------- BT standard Quarterly subscription, pounds 22.96 BT Option 15 Standard BT charge plus pounds 4 quarterly Mercury Standard BT charge plus pounds 11.75 a year Mercury Freq Caller BT charge plus Mercury plus pounds 5.88/qtr Diamond Cable Monthly rental, pounds 7.64

----------------------------------------------------------------- Call and time BT Opt15 Merc Freq Diamond Nott/London 10am, 5min 65p 59p 53p 46.5p 49p Nott/London 4 pm, 10sec 4p 3.6p 3p 3p 3p Nott/Malvern 8 pm, 5min 30p 27p 18.1p 18.1p 20p -----------------------------------------------------------------

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