The UK Telecommunications watchdog, Oftel has published consultative proposals designed to give consumers cheaper phone bills.

In the document, the regulator said it plans to impose retail price controls, of the retail price index minus 4.5 per cent, on BT until July 2002. Oftel claims this could save BT's residential customers about £270 million during this period.

Oftel is also going to maintain price caps on BT's interconnection services, which permit other operators to connect to BT's network.

Warning Oftel has warned that it will introduce more regulation if competition in the telecom's markets does not increase "significantly" over the coming year. Oftel said this "could include allowing service providers without their own networks to use BT’s network at a cost-based rate - significantly cheaper than they currently pay".

David Edmonds, director general of Oftel, said: "BT's call prices can still fall further, and Oftel has decided to protect consumers by continuing retail price controls for another year."

The document follows Tuesday's announcements from Oftel in which the regulator introduced a series of proposals to help increase competition in the provision of services over unbundled local-loops.

Oftel offered operators the option of providing voice calls and high-bandwidth services - such as fast Internet access, video on demand or high-speed data transfer - over the unbundled local loops.