Phoney war, real choices

Making a call on a mobile phone is cheaper than on an ordinary line - as long as you are ringing someone in New York. This anomaly is the result of the latest salvo in the mobile phone price war. Last week Orange, one of the four mobile networks, announced new prices for overseas calls from its phones.

A five-minute daytime call to the United States will from Wednesday cost 88p, including VAT, on Orange. BT's standard rate from a home phone is pounds 1.17. The same call on a Vodafone mobile costs pounds 3.99, and pounds 6.46 on Cellnet. A five-minute call to Berlin costs pounds 1.06 on Orange, against pounds 1.42 on BT.

Rival companies question Orange's motives, calling the cuts a "publicity stunt". There is a long way to go before using a mobile phone in Britain is as cheap as a fixed phone: a typical daytime mobile call costs between 20p and 30p a minute, against BT's long-distance rate of 8p.

Even on overseas calls, Orange faces stiff competition from other companies such as AT&T of the US and international call specialists such as Swiftcall and ACC. Swiftcall, for example, charges 14p per minute to the US, against Orange's tariff of 17.6p. Even BT offers discounts through its Friends and Family and PremierLine schemes.

Orange's new tariffs are just the latest in a series of cuts in the costs of mobile phones, as operators fight for market share. Competition in the high street means a subscriber can buy a phone for as little as pounds 10. Three years ago, a similar phone might have cost pounds 200.

Buying the set itself, though, is just the start. Customers have to pay a connection charge, typically pounds 30, and a monthly line rental, which ranges from pounds 17 to pounds 50 depending on network and price plan. Then there are call charges. All the mobile networks now offer tariffs that include some calls in the monthly fee. Anything more has to be paid for, and some calls - to other mobiles, overseas numbers or information services - are usually excluded from the "free" calls.

Buying a mobile phone at the cheap, advertised rates means signing an airtime contract. This is because the networks, or airtime resellers, subsidise the costs of the phones to encourage people to subscribe. If they did not a digital mobile phone would cost anywhere up to pounds 400. In return, the networks demand that you use the service for at least 12 months, and some resellers demand three months' notice to cancel the subscription.

Airtime contracts are also a hiding-place for additional charges. Orange and One2One sell directly to the public, through stores, so their terms and conditions are standardised. Until recently, Vodafone and Cellnet could only sell through a service provider such as BT Mobile or People's Phone (now part of Vodafone). Most phones are still sold that way. Vodafone and Cellnet have recommended prices, but resellers are free to set their own conditions. This might mean longer peak hours, or extra charges for itemised billing, or for not paying by direct debit. Vodafone alone owns six service providers, with 87 different tariffs between them. The company admits that there is "clear scope for rationalisation".

The industry still has some way to go to make buying a mobile phone simple and catch-free. People on the older, analogue networks can pay twice as much as new subscribers to a digital network.

Daunting as it might seem, there is no real alternative to comparing prices in detail. It is also worth thinking carefully about where and when you use your phone before choosing a network or tariff. Cellnet's "Social Life" tariff charges 5p for off-peak calls, making it one of the cheapest networks in the evening. But the daytime charges are a huge 80p per minute. One2One does not charge for accessing its answering service. For some users, this is a real saving; for others, it is irrelevant.

Mobile operators refuse to be drawn on future price cuts. "In terms of our digital offering, there is no change anticipated to these prices," says David Danielli at Vodafone. But for friends, relatives and colleagues of mobile users, there is good news. BT is expected to cut the cost of calling to a mobile next month.