Telecommunications regulator Ofcom yesterday announced that it is to remove retail price controls which determine the amount of money BT can currently charge its customers for line rental and landline calls.
BT, which has been subject to retail price regulation since its privatisation 22 years ago, will now be free to cut its charges in order to battle with rivals in an increasingly competitive market.
Ofcom said the changes, which will take effect from August 1st, were being made due to the "rapid growth of competition and continued reductions in the cost of phone services for customers".
Nearly 11 million households and small businesses in the UK now use providers other than BT to make phone calls.
The regulator added that alongside greater competition in the retail voice market, technological changes would benefit consumers even further by encouraging further entrants into the telecommunications market and allowing prices to drop further.
Ofcom said that the increasing popularity of mobile phones and the availability of services such as voice over internet protocol (VoIP) phone calls over the internet, which are already used by 500,000 UK households and small businesses, would support such a trend.
Responding to the announcement, BT pledged that it would limit increases to charges for its basic line rental product in order to avoid disadvantaging customers whose line rental forms a large proportion of their phone bill.
"We will now look at how we can simplify our pricing structures and make them more user-friendly," said BT retail chief executive Ian Livingston in a statement.
Commenting on Ofcom's decision to remove the retail price controls on BT, the regulator's chief executive Stephen Carter said: "The success of regulation is rarely measured by the ability to remove it. This is a good example of a market now functioning well."
"This deregulation is accompanied by appropriate and specific protections for vulnerable groups," he added.