Millions of internet users could benefit from cheaper bills after telecommunications watchdog Oftel yesterday ordered BT to cut wholesale charges for its unmetered access service.

The regulator demanded that BT reduce the price it charges other companies for the use of its lines. However, telecoms operator Energis, a big customer of BT's wholesale unmetered dial-up service, said it had not decided whether to pass on the benefit to customers. The ruling is expected to put a £17m dent in BT's revenues.

Oftel ordered BT to cut wholesale fees by 17% after a two-year investigation triggered by complaints from rivals Cable & Wireless and Energis.

The reductions, proposed in April, will be backdated to June 2002, when BT upgraded its network.

Energis was considering yesterday whether to pass on the cuts to internet service providers, a move encouraged by Oftel. Energis provides the network for Freeserve, one of Britain's largest ISPs.

"We will be reviewing cost saving implications with our customers on an individual basis," the company said in a statement.

Freeserve, with an estimated 4.7m narrowband and broadband customers, has warned that any savings will be minimal by the time they filter down to consumers. The ruling will not affect broadband customers but there are 4m narrowband users in the UK. Despite this, analysts expect the ISP and rivals including AOL to profit from a lower cost base.

A spokesman for the Department of Trade and Industry yesterday endorsed lower access costs for users. "Anything that reduces the price for consumers and increases competition in the market is welcome," he said.

C&W was the first to accuse BT of inflating access prices, in May 2001, but has since retreated from the narrowband market to concentrate on broadband.

Energis added its voice to the complaint, prompting Oftel's investigation. It concluded that BT was charging third-party operators such as Energis and C&W for call management and call routing services, despite the fact that technological improvements made them redundant.

David Edmonds, the regulator's director-general, gave a clear signal how he felt about passing on the discount.

"I hope that operators pass these savings on to their customers," he said in a statement. "The action taken today ensures that BT continues to recoup the cost of providing wholesale unmetered internet access, and that UK consumers continue to benefit from one of the most competitive dial-up internet markets in the world."

Analysts believe the cuts would not greatly affect BT or other industry players, given that most companies are switching from dial-up internet access to broadband.