Let your savings do the talking

Switching from one telecoms supplier to another is an easy way to cut your phone bill. So why don't more of us do it?

The ending of British Telecom's phone monopoly has brought enormous benefits to consumers. Prices have fallen and service standards risen. Yet a surprising number of people have failed to take full advantage of the open market.

The ending of British Telecom's phone monopoly has brought enormous benefits to consumers. Prices have fallen and service standards risen. Yet a surprising number of people have failed to take full advantage of the open market.

"Our research shows that although the UK has a thriving telecoms market, one in three consumers aren't aware of the choices available, and so miss out on potential price savings and services on offer from different telephone companies," says David Edmonds, director general at the Office of Telecommunications (Oftel).

"All consumers have at least three different types of provider for their fixed line telephone, and although those that have switched company have saved up to 20 per cent on their bills, many people are not aware of the benefits of shopping around for alternative suppliers."

With average bills at around £300 a year, that equates to £60 a year wasted, or maybe £120 for a heavy phone user. One journalist who took up NTL's offer of free internet access instantly eliminated local call charges to his internet service provider at £75 a month - some £900 a year saved. More benefits are promised soon. Oftel - under the direction of the European Commission - has just ordered BT to "unbundle local loops".

In simple language this means that from early next year, BT will face increased competition for the local call market, as well as on national and international calls. This should open up the internet access market further, bringing down prices for many more users.

One surprise is that only a quarter of consumers have moved away from BT. According to Oftel, an estimated 15 million phone users are not even aware they have a choice of phone services. Many more are unaware that they can move their phone service without losing their existing phone number.

The difficulty, as with other utility services, is understanding the range of suppliers and comparing complex price structures. But under pressure from Oftel, the main telecoms operators recently established a web site - www.phonebills.org.uk - which enables users to key in their personal information and obtain comparison prices.

Factors influencing price include the timing of calls, how much use is made of the internet and the proportion of calls that are local, national, international or to mobiles. Surprisingly, BT can be very competitive in price terms compared with its main rivals, the cable networks, provided optimum use is made of its discounts. Many BT subscribers would save most by switching to more cost-efficient BT subscription options, such as its Light User Scheme, or BT Together for heavier users. Cable operators vary according to region, but the main ones are NTL and Telewest, with others running smaller franchises - such as Eurobell in the south east and Cable & Wireless's cable service (recently purchased by NTL) in London. In some cases the cable companies are more expensive than BT, but offer attractive additional services.

Perhaps the best of these is NTL's free access to the internet, but NTL also provides an additional phone line free of charge in some areas, or for £5 a month in others. Some of the best phone deals come from companies that do not offer line rental, requiring users to continue to rent a line from BT or a cable company. Several services offer very cheap international calls, at the price of inconvenience. They may require prepayment and call connection via an automated call centre, but doing this can - for example with Swiftcall - reduce the cost of a daytime transatlantic call from 24 pence a minute with BT, down to just five pence a minute.

First Telecom also outperforms BT and the cable companies on international call charges, while costing more than Swiftcall. But a special offer currently available from First Telecom is worth considering. Calls from one First Telecom customer to another can be free of charge, wherever they are situated in the country. The offer only applies to billed customers (as distinct from those prepaying) who spend more than £10 monthly on calls if both parties have bought adapters (costing £4.95). The adapters remove the need to dial an access number to connect calls.

A quarter of homes now use the internet and the cost of call charges, even dialling through local call rated numbers, has become the largest element of many phone bills. Internet users facing high bills are well advised to urgently seek connection schemes providing unlimited access either free of charge or for a small fee. NTL offers unlimited free access to the internet for consumers who also use its phone service. There has been such a huge demand for this - 650,000 applicants at the last count - that the company has suspended taking on new internet subscribers until it manages to clear the backlog.

There is now a two month queue for the CDs needed to access NTL's internet service. As NTL is an internet service provider (ISP) it is also possible to avoid ISP subscription costs. All telephone users can now opt for flat rate, unmetered internet access, thanks to a recent Oftel ruling. The BT Internet service provides unlimited internet access for £9.99 a month. AltaVista's Claranet, accessed via an existing phone service, provides unlimited internet access for an annual charge of £59.93. The move to either free or unmetered use of the internet can have a comparable impact on the cost of international phone calls. Several companies - called internet telephone service providers or ITSPs - enable the internet to be used for phone calls. If combined with unlimited internet use, the international phone calls are free - except for charge levied by the ITSP. To use this facility you need a PC equipped with a sound card (most PCs come with them, now), a microphone (costing about £10) and, preferably, headsets.

But last month Microsoft made available free software on the Net - via its Hotmail site, www.hotmail.com - enabling users to by-pass ITSPs. Microsoft Messenger 3 software allows users to exchange voice messages over Hotmail through both parties going onto the web site's chat room at the same time. The software can also be used to make direct dial calls from PC to phone to the United States or Canada, with the range of countries that are covered to be extended later this year.

The problem with these systems has been loss of quality and a time delay in hearing the other person. Shereen Meharg, marketing manager for Microsoft in the UK, says that this is no longer a major problem. "The quality is pretty good," she says. "I used it last weekend and could understand people fine." But there is no point in trying to save money on fixed line phones and the internet without also reviewing the cost of mobiles.

Indeed, five per cent of the population now has a mobile without a fixed phone line - and there are now more mobiles than fixed lines in some countries, including Finland and Japan. Low phone users, especially those who are away from home a lot, may be better off without a fixed line phone, saving themselves £111 a year on BT line rental. Many of the mobile services now provide an hour's free calls a month. The cheapest deal for a low mobile user, according to Which? when it recently compared tariffs, was One2-One's Telecom Plus service costing £12.51 a month.

Choosing between the mobile networks can be very difficult. The first principle is to establish which networks provide good coverage where you live and most frequently visit. The network that is generally cheapest, One-2-One, has the poorest coverage with just 57 per cent satisfaction according to a Which? magazine poll of its readers.

The best networks are provided by Orange and BT Cellnet. When examining the extremely complex mobile pricing structures, it is important to compare costs against personal usage patterns: some tariffs are best for heavy daytime usage, others for weekend use.

It is also worth bearing in mind that network operators, including BT Cellnet, can offer large subscription discounts on contract renewal.

The difficulties in comparing telecoms prices can be severe. But the payback from the investment in time makes it worthwhile. Heavy users of phone and internet can save £1,000 or more a year.

It makes sense to make those phone selections carefully.