9 December 2005 Telecoms heavyweight BT is set to counter attack the growing threat of Internet-based telephony services offered by rivals such as Skype, by developing its own services and promising to undercut the competition.

BT’s retail unit will release a revamped voice over Internet Protocol (VoIP) service in early 2006, promised the unit’s CEO Ian Livingstone.

The telecoms giant already provides some VoIP services, allowing users to make voice calls via their PC, or to make Internet calls using a standard phone. But it has done little to marketing the service, fearful of cannibalising its land-line businesses.

Now it is promising to revamp these services in a bid to stave off the threat from VoIP companies such as Skype.

Skpye has been offering users cheap calls via the Internet since 2003, but quickly attracted a large customer base and was recently purchased by Internet auction site eBay for an initial $2.6 billion, although that price could rise.

BT’s decision to aggressive target the VoIP business marks a recognition within the company that it could not afford to ignore the technology.

The telecoms giant is still dependent on fixed line calls for the bulk of its revenues.