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Communications watchdog Ofcom is to launch an investigation into BT's decision today to axe is standard rate tariff, according to sources.

It's understood the regulator is concerned that BT might be acting anti-competitively by squeezing the margins of rival telcos.

A senior spokesman for Ofcom declined to comment on BT's announcement today except to say: "We are considering a full investigation."

BT has hailed today's news as a measure that simplifies its tariff structure and make its service even better value for money for its customers.

However, rivals have been quick to point out that by scrapping its standard rate, the UK's 2.5m carrier pre-selection (CPS) customers will see their bills rise by £12 a year.

CPS enables punters with a BT phone line to switch providers by receiving two separate bills - one from BT for line rental and one for calls from their new phone provider such as Centrica, Carphone Warehouse or Tele2.

Now that the cost of the minimum line rental has risen by £1 a month, CPS customers are being faced with an immediate extra charge. There are also concerns that new call tariffs imposed by BT could also be squeezing the CPS market.

Centrica - the company behind the One.Tel branded telco - has already lodged a formal complaint with Ofcom. It says that BT's move "undermines competition and has an impact on the CPS market".

Ian El-Mokadem, MD of Centrica Telecommunications, said the move penalises the nine million people currently signed up to BT's standard rate.

"If BT is permitted to do this, customers who want to exercise a choice and use another supplier will also be penalised by having to move to a more expensive line rental charge. From a regulatory perspective it appears to be an overtly anti-competitive move in the absence of a viable Wholesale Line Rental product. This has to be subject to Ofcom approval. Ofcom need to act."

Andy Dewhurst, chief exec of CPS outfit Tesco Telecom, said: "This announcement is all smoke and mirrors. It is designed to inhibit competition, which is bad for customers and increasing their line rental is not what we would call a price cut.

"BT are denying nine million people the chance to be on their standard rate and forcing them onto a subscription based tariff with higher line rental.

"We will continue to offer customers our standard rate as we know how popular it is and we are committed to giving real choice, value and the transparency," he said.

uSwitch.com - which provides independent comparative advice for people looking to switch providers - said that today's move would lead to cheaper bills for many existing BT customers, with average users seeing a reduction of around £24 a year.

"However on the down side, these changes will have a detrimental impact on 2.5 million carrier pre-selection (CPS) customers, who are billed by BT for their line rental but pay another provider for their calls; these customers will see annual bills rise by £12 a year," said Jon Miller, director at uSwitch.com.

"It's disappointing to see that BT's changes will have a negative effect on some customers, and we fully expect the CPS suppliers to react strongly, with further price reductions anticipated in the coming weeks.

"Whilst the cost of calling may be coming down, the fact remains that consumers will still be charged a minimum £31.50 a quarter before they've even made a call. BT is still not the cheapest supplier in the market, switching is easy and you can make significant savings by shopping around."

BT said that today's move would lead to more expensive bills for CPS customers.

A spokesman insisted that the telco's announcement had been cleared by Ofcom and was surprised to hear that the regulator was considering an investigation. ®

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