Telecoms watchdog Oftel has further open-ed up the UK phone market by enabling BT's rivals to offer more competitive bills.

The regulator wants BT to rent its phone lines to other operators for the same price as it charges its own retail division.

That will allow other operators the chance to offer their customers one single bill covering both line rental and calls costs.

Oftel believes the move will greatly increase competition as rivals will be able to provide new services such as flat-rate subscriptions for unlimited calls or the abolition of line rental charges.

The move, which was first proposed by Oftel in January, will be accompanied by a new price control reducing bills for BT's lowest-spending 80 per cent of customers by the rate of inflation. The price controls will be revised to one which pegs prices to the rate of inflation once competitors have introduced the rival services.

Oftel said the intention was to remove all controls when the market was considered truly competitive.

Director general of telecommunications David Edmonds said: "These measures represent a significant move away from traditional price controls and will lead to their total abolition once the market is effectively competitive."

Oftel's decision to allow companies to offer a complete residential telephony service is likely to give the major utility companies the chance to cross-sell services as part of a single package.

BT will study the report before providing a detailed reaction but said the proposals were in line with its expectations. A spokes-man said: "We welcome the strategy as it moves towards the relaxation of price controls. It will also give us greater flexibility in developing packages for our own customers."

The Oftel proposals include raising the limit for eligibility to BT's light- user scheme from the lowest spending 20 per cent of customers to the lowest 30 per cent. The scheme provides reduced line rental for customers who make few calls.