Telecoms regulator Oftel announced plans yesterday to increase competition in the market which should see lower phone bills in the UK.

The watchdog wants BT to rent its phone lines to other telecoms service providers at the same rate it charges its own retail division.

Competitors will be able to offer customers one bill covering line rental and the cost of calls, rather than the present arrangement where BT presents a bill for line rental, and competitors bill separately for calls.

The proposal could see the introduction of flat rate subscriptions for unlimited calls, which have proved popular for internet service providers, or the abolition of line rental with costs recovered through call charges.

The regulator hopes that increased competition will eventually dictate prices rather than Oftel itself. "The aim is to reduce call prices through increased competition which should lead to the eventual abolition of price controls," Oftel stated.

"Competition has begun to bite," said the watchdog's director general David Edmonds. "The market is changing and regulation needs to change to reflect and accelerate this."

Edmonds added that a continued safeguard on price control remained essential while competition in the calls market develops.

BT's prices for services to the lowest spending customers will be pegged at their current level and will not be allowed to rise with inflation.

The incumbent and its rivals have three months to respond to the proposals, and a final decision is expected in late June.