The proposals would allow BT to set its own prices for the first time in 22 years.
According to Ofcom, new technology and the growth of competition have transformed phone services over the last 10 years. Average call prices have fallen by more than 50% since 1996, while more than 10 million households now use providers other than BT for their phone calls.
New technology has had an impact. According to Ofcom, industry estimates suggest that there are now more than 500,000 active VoIP users in the UK. Mobile phone use is still increasing, with 31% of all UK voice call minutes originating from mobile phones rather than from fixed-lines in the period between July and September 2005. There has also been considerable competitive local access investment, says Ofcom.
The watchdog believes that the time is right to consider allowing retail price controls to lapse.
But Ofcom will not release control entirely: its proposals include important protections for vulnerable groups as well as specific pricing assurances from BT on key services including line rental. These assurances would remain in place until the end of 2007 and would be in addition to existing statutory requirements from BT under its Universal Service obligations.
Ofcom plans to carry out a review of the retail market in 2007, in order to assess the impact of deregulation.