It's a price landslide on landline phones

Fed up paying through the nose for your home phone? Well, you can hang up on big bills as there's a price war raging in the landline market, with providers such as BT, TalkTalk and One.Tel all battling for pole position.

Fed up paying through the nose for your home phone? Well, you can hang up on big bills as there's a price war raging in the landline market, with providers such as BT, TalkTalk and One.Tel all battling for pole position.

But none of these companies gets so much as a look-in compared to the cheapest deals on offer. Take Call18866, which charges a flat 2p "connection charge" per call to any UK landline - regardless of duration.

As with most call providers, this is an indirect-access phone company, which means you have to go on paying your line rental to BT or your network provider. But there is no monthly set-up, administration, or per-minute charge.

To use this service, you just set up an account on the internet (www.call18866.co.uk) with a debit or credit card. You can then route calls over this network by dialling "18866" before the number you want to ring (unless you have a non-BT landline - with NTL or Tele- west, for example - in which case there is a different prefix).

If you compare this with the equivalent deals on offer from mainstream providers, then Call18866 runs rings around its rivals. With BT's Together Option 1 deal, for example, you are charged 3p a minute during the day. That means a 10-minute call will be 30p - dropping only slightly to 27p with TalkTalk's Talk 2 tariff. In contrast, 10 minutes on the line costs just 2p with Call18866 - and 3p with its sister company, Call1899.

It's a similar story if you're ringing abroad: it's still 2p if you call Australia, compared with 22p or 9p a minute (peak and off-peak respectively) with BT, while a call to India would cost 14p a minute with Call18866, against 21p or 24p with TalkTalk (daytime or off-peak).

Calls to UK mobiles on Call18866 cost 3p a minute on Saturdays and Sundays and 12p during the week.

Call18866 keeps costs low by operating an internet-based no-frills set-up. It does not advertise and is virtually impossible to contact by phone.

But even though it offers one of the cheapest deals around, you won't find it listed on the major online price-comparison websites. Karen Darby, the chief executive of SimplySwitch, says it concentrates on big brand names that the majority of people will recognise. But she also points out that Call18866 does have its drawbacks.

Customers cannot pay by direct debit, she says. Instead, the money is collected each month under a "continuous payment authority". Essentially, this is a credit-card subscription and only involves a relationship between customer and retailer. That could carry risks because, should the user want to cancel, it won't simply be a case of telling the bank to stop paying. Instead , it will be a question of making a request to the service provider and trusting that it acts promptly.

"Even when switching to big brand names, some people are uncomfortable setting up a direct debit," says Ms Darby. "So setting up a continuous payment authority with a company they haven't heard of would make many people twitchy."

She adds that Call18866 has a "faceless website", so there is no direct way of contacting the company if something goes wrong, except by email.

Uswitch.com, another comparison site, says it does not list Call18866 as it does not meet the code of practice set out out by Ofcom, the telecommunications regulator. "In short, we only display those suppliers who operate alternative dispute- resolution schemes, as required by the Communications Act," says spokesman Chris Williams.

He adds that while Call18866 offers savings of more than 60 per cent for evening and weekend landline calls - compared to BT - it remains to be seen whether this supplier could ever compete on a large scale.

BT spokesman Michael Jarvis says Call18866 also proves less competitive than BT on several counts, including 0845 and 0870 numbers and evening calls to most mobile networks.

That said, you can still benefit by not dialling the 18866 prefix in the above cases, but routing these calls through your normal provider instead.

While Call18866 is leading the way in home landlines, a firm called Skype is making waves in the internet arena using technology known as voiceover internet protocol (Voip). By downloading Skype software from www.skype.com and investing in headphones and speakers to connect to your PC, you can make free phone calls from your computer. As long as both parties have this software, calls cost nothing - even if you are in different countries.

And even if your friends, family and business contacts do not have the software, you can still use Skype to call ordinary landline phones for 1.1p per minute within the UK. There are also competitive rates for calls to other countries - including Brazil at 3p a minute and India for 10p.

The service does have some restrictions, however. Users need to pre-pay by topping up an internet-based account with a credit card or Paypal - a system that allows you to send or receive money online. And unless you have a cordless headset, you will have to sit at your PC for the duration of the call.

Lining up against Skype are services such as BT Communicator, developed with the internet portal Yahoo!, and GossipTel. Like Skype, these both provide free PC-to-PC voice calls.

However, these competitors do levy a charge for calls to ordinary phones.

While the current deals on internet calls are extremely competitive, it remains to be seen whether this pricing structure is sustainable, as it is likely that Voip will be subject to tighter regulation in the future.