British Telecom Plans Free Internet Calls.

British Telecommunications Plc is planning to take free internet access to a new level by offering free telephone connections according to reports in the UK press. The reports claim that BT is now engaged in talks with Oftel, the telecoms industry watchdog about the plans. However both BT and Oftel denied that any formal proposals have been made.

BT said it is constantly considering new pricing methods and confirmed that free internet telephone calls had been considered. And Oftel said it is constantly engaged in informal talks with BT, as the incumbent telco must gain approval for any new pricing schemes it wishes to introduce. Oftel said the competitive implications of free internet calls have been discussed on a number of occasions with BT, most recently due to the Trade and Industry Select Committee's interest in the free calls model. "All discussions so far have been purely theoretical," said Oftel.

Free ISP services have proliferated in UK since the latter half of last year, with major household names and small start-ups alike attempting to grab market share. With so much competition, the next step for the big players may well be to offer free calls. However some industry analysts warned that BT might be stoking the fires too high. "BT's call volumes have shot up because of internet use and making calls free could lose BT a lot of revenue," one analyst said. But BT could conceivably raise all the necessary revenues through advertising or retailing agreement and the move would undoubtedly put pressure on competitors such as Dixons' Freeserve, one of the early pioneers of free internet access.

Freeserve issued a statement saying, "We don't know exactly what the proposal is, but under Oftel regulations any pricing offer by BT would have to be open to everybody." This suggests that Freeserve would take advantage of the offer and follow suit with a similar free internet call model.

Oftel said the idea of providing free internet calls is not automatically anti-competitive. "Provided the proposed service was self-financing, there is no reason others could not provide a similar service and therefore it would not be anti-competitive," said Oftel, "BT would be behaving uncompetitively only if it attempted to cross-subsidize its internet services with revenues from other services."