New faces eye UK fixed line market

BT Group’s [London: BT.L] dominance of the UK residential fixed line telecoms market is set to come under increasing pressure from a new breed of carrier over the coming months. A number of utility, financial services and retail companies are currently working on plans to enter the sector and undercut BT’s prices, among them leading supermarket chains Sainsbury and Tesco. The former is teaming up with mobile phone retailer Carphone Warehouse to offer fixed line services under the banner Talktalk. The pair have said that they will initially target customers in London, offering services up to 30% cheaper than those of the incumbent. Sainsbury’s great rival Tesco has said it too will begin offering services soon in tandem with UK telco Cable & Wireless.

Although BT still retains an iron grip on the sector, recent reductions in its wholesale leased line and line rental tariffs at the behest of the regulator Oftel have given rise to renewed interest in the UK fixed line market from a raft of alternative telcos. Customers are also able to take advantage of a new pre-selection system enabling them to route their calls via a new operator without having to dial a prefix or install an auto-dialling box. Analysts point out that BT is also facing stiffer competition in the business communications sector. A number of the ex-monopoly’s competitors in this sphere have recently trumpeted sizeable contract wins, among them Easynet, Telewest and Energis.

According to Oftel’s latest Market Information Report covering the three months to the end of September 2002, the penetration of fixed line telephony networks in UK homes stood at 91%, with 8% relying solely on mobile and just 1% of homes having neither a fixed nor a mobile phone. Of homes connected to the PSTN, only 23% used an alternative or additional fixed supplier to BT. In the SME business segment the figure was higher, with 42% employing an alternative supplier and 15% using cable. By 30 September 2002 the incumbent still claimed 72.3% of all local calls, 50% of the national market and 28.6% of international calls. At the same date BT’s biggest rivals, cable operators NTL and Telewest, took a combined 14.2% of the local call market, 12.3% of all national calls and 6.4% of the international direct dial sector.