01 May 1997

BT’s INTERNATIONAL call revenues will be slashed by at least £65 million in 2001 as low-cost Internet telephony gains acceptance. A study by London consultancy Philips Tarifica predicts that the UK’s current one million Net-subscribers will have soared to 10m by then - a high percentage of whom will use the Net to make overseas calls at little more than local charges. Other international telephone companies will be equally hard hit, especially Deutsche Telecom which levies higher prices for foreign calls and has a larger international market. Vinton Cerf, a vice-president at MCI, America’s second-largest long-distance operator and BT’s partner-to-be, agrees with Tarifica’s conclusions. Internet telephony has yet to take-off because of poor transmission quality but there have been dramatic improvements of late.

BT is considering the introduction of free local calls in the UK, according to an unguarded remark by a senior BT executive relayed to Debrief by a reliable informant. Although such a happy event may well be a discussion topic within BT’s corridors of power, Oftel could view such a move as anti-competitive. Even if free local calls do come to pass, it is unlikely to be across-the-board. The likeliest scenario is that free calls will be confined to weekends or other non-peak periods - a sprat to catch the succulent mackerel of Internet services provision.