Just over a decade ago, Mercury Communications (later to adopt its parent company's name of Cable & Wireless) changed the world of BT and its customers forever.

By purchasing a phone with a pre-programmed button that dialled a short prefix, together with a user ID number, or, in the case of businesses, simply reprogramming their PBX to dial the prefix and ID number, customers could get cheaper long distance and international calls.

Although Mercury only had two exchanges when it was launched - in London and Manchester - it was able to offer a national service within England (Wales and Scotland followed later) because of an Oftel requirement on BT that it must carry a competitor's calls from the phone user to the competing carrier's exchange, free of charge.

BT was, and continues to be, required to do this, in lieu of the fact of its near monopoly on the local loop that connects most businesses to the telephone network. These days, of course, there are several hundred Alternative Telecommunication Carriers (ATCs) offering their services, both to residential and business BT subscribers.

Some also offer their services to cable telephony subscribers, but this is usually via an 0800 freephone number, which can delay routing and also tends to be more expensive for them than allowing BT to route the calls to their network.

Some ATCs offer discount rates above all other benefits, including convenience, by requiring users to prepay their accounts and watching those account balances reduce as calls are made. Prepaid ATCs are rarely cost effective for even small businesses, so many ATCs that offer prepaid accounts also offer postpaid (ie billed) accounts to businesses both small and large, usually at higher rates than the prepaid users enjoy.

Accessing these ATCs is a lot easier than in the days of Mercury, when BT's network did not support Caller ID. Just as your customers can tell you are calling them, if they subscribe to a Caller ID service, so the ATCs can tell who's calling by the Caller ID data generated by your local BT (or cable) exchange.

Next year, Oftel has mandated that BT must offer its subscribers a technology known as carrier pre-selection. This allows customers to tell BT which ATC they require to switch their calls and BT must then reprogram its local switch to this for all calls. This neatly does away with the need for call prefix codes, although BT has admitted that it may have problems with reprogramming some exchanges, for carrier pre-selection. In such instances, BT will be required to offer a smart box to do all the switching for the customer, without any PBX reprogramming being required.

Enter the salesman

Because these ATCs do not have access to the resources in the field that BT does, many of them rely on middlemen to sell their services into the business community. These resellers, who often also sell contracts for alternative utility services and even mobile phone deals, make their living from commissions paid by the ATCs, both when the customer signs on the dotted line, then usually on each customer call.

This makes an ATC dealer less interested in a small business customer than a large one. Whereas a large business customer may merit a site visit and ongoing contact, both by phone and in person, smaller companies usually deal with their ATC dealer by phone. Selecting a reliable dealer is not easy, but, generally speaking, if an ATC dealer has been in business for a few years, the chances are they will be reliable.

Remember, however, that profit margins in the ATC business are tight and some of the best contracts are only available by dealing with the ATC directly. Despite the proliferation of dealers and the wide choice of ATCs for businesses, many SMEs seem to like staying with BT for their calls, despite the obvious price advantages available. In fact, according to an independent survey recently commissioned by Unica, an integrated communications provider for firms, and carried out by MORI, most businesses are not exercising their freedom of choice when it comes ATCs.

The survey of 301 senior managers responsible for telecoms - 100 in SMEs (less than 250 employees), 201 in large businesses (250+) across the UK - revealed that many companies find it hard to juggle between different fixed, mobile and internet network operators, and that many would prefer an impartial intermediary to shop around on their behalf. The slightly bad news is that a third of all respondents to the survey said they are locked into contractual obligations that prevent them from switching operators. On top of this, while 60% of large firms have changed network operator in the past five years, only one third of SMEs have changed.

Some rates are fairer than others

While BT charges customers for calls by the second, subject to a 4.2p minimum, some ATCs offer quite stunning rates - as low as 2p for national calls at peak times and a shade more for calls to the US - but impose other call charge limitations.

Vartec, for example, offers some good rates on international and national calls, but subject to a 10p minimum: this is no good if the bulk of your calls are short.

Others, such as World Xchange, formerly known as ACC Telecom, offer enticing small business and consumer calling plans, but impose a monthly subscription (£4.95 for WorldXchange's best small business plan) and/or a per-minute call charge. This means that, for example, a 70 second call to Poland using WorldXchange's best small business rate, its Penny Plan, which costs £4,95 a month subscription, will cost just 15p per minute. Unfortunately, because calls are billed in 60 second increments, that 70 second call is rounded up to 120 seconds for billing purposes, then charged at 30p in total.

Such contractual "quirks" are what nibble at the considerable savings that ATC users would appear to enjoy on paper, meaning that the best overall deals are often not those that appear to have the best discount rates. Carriers such as First Telecom, as well as MCI World Com, offer rate tables and deals to business customers without any quirks such as per-minute billing.

The larger and more well established an ATC is, the better its range of services available to businesses. First Telecom and MCI WorldCom, for example, offer discount inward 0800 (freephone) services, and 0845 or 0870 non-geographic codes to customers. Turning this on its head, we find that the "better" ATCs, including those who do not have hidden billing issues in their terms and conditions, tend to offer a wider portfolio of services. Vodafone, for example, also offers fixed line and discount calling services to businesses, thanks to a linkup with Energis, the telecoms spinoff from the former National Grid.

In fact, the complexity of the call tariffs available from ATCs is such that, if your annual spend on telephone calls, excluding line rental, exceeds £1,000, then it would probably be worth talking to an ATC dealer.

The dealer can then select the best carrier(s) for your calls, or even recommend the installation of a so-called "smart box" which routes calls across different carriers, the actual routing depending on the call destination and the time of day.

One popular firm that offers smart box routing across several carriers is LCR Telecom. LCR stands for Least Cost Routing and allows the company to offer some of the best rates in the business. Installing a smart box, however, may only save a company paying, say, £2,000 a year for its calls, an extra £100 a year, and there may be rental to pay on the hardware.

BT fights back

Contrary to what many observers thing, BT is fighting back for its market share in the business calls arena.

Unfortunately, as anyone who has ever grappled with BT's business deals, the sheer complexity of the discounts available from BT is enough to baffle even the most dedicated telecoms manager with a large corporate, let alone small business, manager.

As a general rule of thumb, most of BT's business discounts - good though they are - are rarely as good a deal as those available through most ATCs. Furthermore, BT's discount calling plans usually entail some form of subscription charge.

This means that, before you can take advantage of the discounted rates available, the subscription deal payable has to be clawed back. This produces some interesting tables, especially for those companies who make the bulk of their calls within the UK. Such tables almost invariably show that businesses have to make up to £100 worth of calls per quarter before reaching a breakeven point on the subscription deals available. Most ATCs, on the other hand, offer their discount rates for all calls, usually without any subscription being payable.

And for those business users who make a lot of international calls, it is almost always the case that an ATC can beat BT's calling rates hands down. This is clearly the case with OneTel, an Australian ATC with a UK subsidiary that offers some of the best international calls rates going and, despite its per-minute billing, is still a very good deal for small businesses.

The bottom line to this is that almost every business customer of BT can save money by routing at least some of their national and international calls via an ATC. Line rental, meanwhile, continues to be payable to BT, and local calls continue to be routed across BT's network. BT's sales staff will often argue that their calling plans are better than those of an ATC.

Consider this, however: Cable & Wireless, which offers only average ATC calling rates to its residential customers (ie those who make less calls than business users) offers a double moneyback guarantee to its customers if they find their bills would have been cheaper using BT for all their calls.

To date, Cable & Wireless has only paid out a few customers whose calling patterns are relatively unusual, and where its tariffs (for those calls) have proven to be not competitive enough. If Cable & Wireless can do this for its residential customers, then BT business customers, who are entitled to better discounts on their BT call rates, must be a lot better off routing their calls via an ATC. So what are you waiting for?

Jargon buster

ATC: An alternative telecommunications carrier. In other words, a telephone company other than British Telecom.

Carrier pre-selection: A technology which will allow you to tell BT which telecoms carrier you want to handle your calls. That means you will no longer need to prefix calls with any extra codes in order to use another carrier. The local loop: The much fought-over piece of wire that runs from the exchange to your business or home. At the moment, BT has a monopoly over this "last mile" of wire. This monopoly is due to end next year, when telecoms companies other than BT will be able to install equipment in local exchanges. This should allow more competition in telephone services, although just how much more is a matter of fierce debate.