Dixons Stores Group is to offer the cheapest UK VoIP (voice over internet protocol) service yet. FreeTalk will launch this Thursday and, according to group managing director Simon Turner, DSG believes it will be “the lowest-cost telephony service available to consumers in the UK”.

Customers will be able to choose between buying an £80 adapter that comes with 12 months of free calls, or shelling out £20 for the adapter plus £6.99 a month on a pay-as-you-go basis. After the initial contract period, FreeTalk will cost £6.99 a month.

Recently there has been a flurry of VoIP-related announcements by ISPs, as well as from dedicated VoIP companies keen to add to their broadband packages and to entice consumers away from low-cost Pots (plain old telephone system) carriers that are undercutting BT.

Turner says that with nearly 7 million UK households now enjoying a broadband connection and uptake rising rapidly, the time was right for DSG’s FreeTalk. VoIP services, he said, were now “stable and easy enough to launch to the average home user”.

Although it requires a broadband connection, FreeTalk is not a PC-to-PC service. There is no need for the computer to be on or for the user to be near it. Instead, an adapter enables consumers to call other IP phone numbers using their existing home phone.

Calls to fixed lines in the UK and to other FreeTalk numbers will be free, while international call rates compare favourably with other telco offerings. Customers will be able to take the necessary adapter with them, plug in to a broadband service abroad and make calls using their FreeTalk number without racking up roaming charges.

As ever, mobile phone charges will be more pricey but Turner says DSG is at pains to make the payment structure clear. FreeTalk will be usable on the move via WiMax. As yet, there are no reciprocal arrangements for callers using competing VoIP services, although it’s likely these will come in time.

Customers will be able to choose their own UK or overseas dialing code and use up to 10 virtual numbers. There will be no premium for popular area codes such as central London. Additional phone lines will cost £2.99 each with a setup cost of £5.99.

Demonstration units have yet to be supplied to UK journalists and there was no live demonstration of FreeTalk at today’s pre-launch event, but DSG claims the service’s call quality will pass muster. Despite this, it will be positioning FreeTalk boxes on shelves adjacent to the latest Dect digital handsets “suggesting” that since such phones cost as little as £20, punters may as well treat themselves to a new handset along with their £70 for a year’s FreeTalk service.

However, Turner is confident of the service’s success. He cited the fact there are already 60 million VoIP customers worldwide and analyst predictions that by 2008 half of broadband users will have given up having a home phoneline.

Dixons is in a dominant position, it believes, as it has over 1,000 retail outlets across its Dixons, Currys, PC World and The Link stores, plus four “transactional websites”. And unlike BT and other telcos, it has no pricing structure to protect or need to spend money acquiring customers.

Boxes containing a phone adapter and the necessary cable to make the all-important connection with a broadband-enabled PC will be sold in all four of DSG’s retail chains from this Thursday. The 50 biggest Dixons stores will have FreeTalk from the off, as will all outlets of DSG’s other retail brands and the associated websites.

DSG will be announcing cut-price partnerships with AOL in a few weeks time and a business VoIP service early next year. It is also likely DSG will roll out similar services elsewhere in Europe.