After an absence of twenty-four years from the UK telephone market, the Post Office is launching a service to challenge telecoms giant BT.

The new HomePhone service will aim to attract one million customers by 2008, up to 5% of BT's residential telephone business. Its weapon of choice in this duel will be price - up to 20% cheaper than BT.

When Margaret Thatcher's administration came to power in 1979, the GPO, as it was then known, enjoyed a monopoly of the nation's mail and telephone services. The Conservative government's zeal to privatise anything not nailed down resulted in BT being spun off in 1981.

Enthuses Post Office ceo David Mills about his new offering: "It's simple, the savings are damn good and the service is good. We don't use call centres abroad, we don't have an interactive voice response system. If customers have a problem, they can simply come in and see us."

The Post Office, a unit of the state-owned Royal Mail Group, is among a raft of new players threatening BT's traditional dominance in the residential telecoms market. The challengers have taken advantage of the Wholesale Line Rental legislation which allows users to pay call charges to firms other than BT.

The latter, however, says it is confident it can withstand its former sibling's onslaught.

Data sourced from BBC Online; additional content by WARC staff