The government today breaks BT and Mercury's duopoly in owning international call networks, by awarding over 40 new international licences. Likely winners are expected to be Europe's largest operators, Deutsche Telekom and France Telecom, the US' AT&T, and homegrown contender Energis, part of the National Grid.
Several cable companies and US operators are also in the running. Under the new licences, such companies will be able to buy permanent line capacity from sources other than BT and Mercury, which were previously the only organisations allowed to own networks for international services. Rivals complained that BT and Mercury lease rates were so high they in effect kept competitors out of the market. Now these competitors can lease from owners of undersea cables and satellites, giving them more pricing flexibility.
For the consumer, prices are likely to plummet with the increased competition, possibly by as much as 50 per cent.
The DTI has taken a policy of awarding licences to virtually all applicants, regardless of their country of origin. Its motive is to make the UK the main telecomms hub of Europe.
BT and Mercury have been preparing for the new situation by reducing call rates, particularly on trans-Atlantic traffic, to give newcomers less room to manoeuvre. They are also focusing their strategies on other areas of business - BT on its global ventures, such as the proposed MCI merger, Mercury on its cable joint venture.
BT has stated that it expects to lose market share, although this may be offset in terms of revenue by increased overall call volumes. It may also help BT to succeed in pushing through the MCI merger - any likely objections from antitrust authorities will be on the basis that the UK is not sufficiently open to competition.
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