BT on Wednesday night said it could cut the cost of some telephone calls after the telecoms regulator announced the lifting of retail price controls, 22 years after the company was privatised.

Ofcom, the media and telecoms watchdog, said increasing competition meant it would from next month abolish controls that limited rises in the price of calls and line rental for BT customers.

Almost 11m UK households and small businesses now get their fixed-line phone service from companies other than BT’s retail division.

British Sky Broadcasting, the satellite TV operator, on Tuesday became the latest company to unveil a cut-price fixed-line phone deal.

James Murdoch, BSkyB chief executive, said his company would charge its customers £5 a month for an unlimited national calls package, alongside a £9 line rental fee. It would be the lowest line rental fee in the UK.

Ofcom said the trends of increasing competition and falling prices were likely to gather pace because of new phone technologies such as Voice over Internet Protocol.

Stephen Carter, Ofcom chief executive, said: “The success of regulation is rarely measured by the ability to remove it. This is a good example of a market now functioning well.”

BT said it was reviewing its options following Ofcom’s decision, and might simplify its tariffs following criticism that they are difficult to understand.

The retail price controls applied to local, national and international calls, plus those made to mobiles.

“Some prices of services could go up, some could go down, but it is too early to confirm which will do what,” said BT.

“Overall, however, BT will be offering a very competitive and attractive set of tariffs.”

BT has agreed that any increases in its line rental fee, currently £11, would be limited so that it did not penalise people on low incomes.

The increasing competition has been spurred by the belated take-off of local loop unbundling, a process that gives BT’s rivals control of the landlines that run from people’s homes to phone exchanges.

The process is enabling companies to supply cheap phone and broadband packages.

Carphone Warehouse, the mobile phone retailer, has since April been offering “free” broadband to people who sign up to its £20 fixed-line phone deal.

Bear Stearns, the investment bank, on Wednesday estimated that up to 600,000 people had requested the package.

Ofcom continues to maintain price controls on what BT can charge other telecoms companies for use of its phone network. BT’s shares closed on Wednesday with a gain of 2 per cent at 231½p.

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