BT tariff rise adds pounds 36 to phone bills

BT is to increase the line rental charges for residential and business users in a move that will put an extra pounds 36 on domestic phone bills a year.

The price increases will fuel concerns that higher line rental charges discriminate against customers who make few calls. However, BT said the new tariff was part of its agreement with Oftel, the telecoms regulator, under which revenue from rental increases is used to cut the cost of calls.

The decision comes ahead of an announcement by Oftel on Monday which will outline its proposals for the new price structure that will come into force in July 1997.

The stock market reacted warmly to the news, marking BT shares 9.5p higher at 355.5p yesterday as some analysts suggested that the Oftel review was not expected to be too Draconian.

The new line rental charges will come into force this July and will be pounds 25.69 per quarter for residential customers and pounds 41.13 for businesses.

BT said the changes were the first increase to line rentals for 17 months and amounted to just a penny extra a day.

It also announced a programme to provide free conversion to modern plug and socket connections for customers who still rent phones with direct wiring. This normally costs pounds 29 but the fee will be waived during a special offer period of six months. Around 1.8 million customer still have direct wired phones.

Don Cruickshank, director general of Oftel, welcomed the changes. "BT has met its commitment to ensure that the increases in exchange line rental are such that no customer will suffer a real increase in his or her quarterly bill (for the same usage). He said the price changes followed reductions in call changes which were announced on Tuesday.

BT also drew attention to its low user scheme for people who make relatively few calls but need a phone as a lifeline. The maximum number of calls participating customers can make will be increased to pounds 15.67 a quarter from July. Customers within this receive up to 60 per cent off their rental charge.

BT said that main prices were coming down by more than pounds 300m this year. It also said the rental charges represented an increase of 3.7 per cent for residential customers and 2.4 per cent for businesses - below the 3.9 per cent increase in the retail price index since the last charge review in February 1995.

BT stressed that no customer's bill would increase by more than the current rate of inflation, 2.4 per cent. Under existing regulations BT can only increase its prices by 7.5 percentage points less than the prevailing rate of inflation.