Mercury set to undercut BT on residential charges

MERCURY will change the way it charges its residential telephone customers next week, with the aim of undercutting British Telecommunications, writes Mary Fagan.

By putting UK calls in a structure similar to that used by BT, Mercury hopes to make it easier for households to compare prices.

Currently Mercury claims to undercut BT by up to 40 per cent depending on the time of day, length of call and the distance over which it is made. But the benefit in some cases may be only a few per cent.

There is speculation that, under the new structure, Mercury will attempt to undercut BT by around 15 per cent across the board and this will help it to make stronger inroads into the residential market. Mercury has about 500,000 residential customers and wants at least two million by the middle of the decade. But none of its domestic customers are yet linked to each other via Mercury alone; it relies heavily on interconnecting via BT. Interconnection charges remain the subject of acrimonious wrangling.

BT's residential charges are based on local calls and charge bands that vary according to distance, whether the route is one of the busier ones, and the time of day.

Comparisons between the two are complex. While Mercury charges by the minute, BT charges per unit - the length of which also varies over 24 hours. Mercury and BT also have different distance bands.