Project Bluephone hopes to the convenience of a cell phone with cheaper fixed-line prices will attract customers.

"We know that many of our customers enjoy the convenience of their mobile phones when they're out and about, but switch to using a landline phone when they arrive back home to save money or because they have little or no mobile coverage," said Ian Livingstone, chief executive of BT Retail.

Customers using the black and silver clamshell v560 handset, which also offers video and digital photo services, will pay land-line prices of 5.5 pence for up to one hour of off-peak calls and 3p a minute for peak calls to land-line numbers.

BT -- which is using Vodafone's mobile phone network and selling two plans for 9.99 pounds ($18) and 14.99 pounds per month -- said an off-peak 10 minute call would cost up to 95 percent less than a typical mobile call

Subscribers will have to have both a BT landline and access to BT broadband. A special access point installed in the home, called the BT Hub, will switch the handset to a broadband line using Bluetooth wireless technology.