Since the abolition of 192 service almost a year ago, calls to directory inquiries have fallen by three million a week and confusion about the different prices of the 118 numbers has worsened.

Now the National Audit Office is to examine whether Oftel, the former telecoms regulator, mishandled the liberalisation of the directory inquiries market.

The Office, which scrutinises government bodies that have used public money, is due to report this year.

In a statement on its website, the NAO stated that its study will examine whether “the expected benefits of liberalisation occurred in practice for the consumers”.

Oftel, the predecessor to the current telecoms watchdog, Ofcom, published plans to open up the £300 million-a-year directory inquiries market to competition in September 2001.

In December 2002 the industry was deregulated to drive down costs and improve the quality of customer service by introducing competition. Then, in August last year, the familiar 192 telephone service — which had been in operation for 47 years — was switched off for good. It was expected that customers would benefit from lower costs as companies dropped their tariffs to attract new business. But much of the expected consolidation has failed to take place and user numbers have sharply declined.

There are about 120 different companies, which vary widely in accuracy and price. The most popular are run by BT and 118 118, run by The Number UK Ltd. Other companies that run services include Telegate, Kingston, Conduit, Opal Telecom and Maureen. The drop in users is also being blamed on the rise of websites that give out the information free. Users can choose from www.bt.com, www.118500.co.uk, www.192.com and www.ukphonebook.com, which all offer internet users the data accurately and quickly.

Jenni Conti, principal researcher at Which?, the Consumers’ Association magazine, said: “It is all very disappointing. The whole premise was that introducing competition would drive prices down but it has not done that. Liberalisation has led to more expensive services and less well informed customers.”

Which? researchers claim that customers find it difficult to know what they are paying for calls because each phone company employs a different pricing structure. Some companies prefer to charge a connection fee plus further costs billed by the second. Others, including Cable & Wireless, charge a one-off amount.

Research on behalf of Ofcom found that typical calls to the 118 services lasted less than a minute but the cost varied dramatically — from 27p to 65p to obtain one number. The two most popular companies, BT’s 118 500 service and The Number’s 118 118, were among the most time-consuming and expensive. Callers to 118 188 were on the phone for an average 60.6 seconds for a residential number. This cost them 58p. Some 86 per cent of numbers were correct.

The average call to 118 500 searching for a residential number lasted 54.2 seconds and cost 54p. Accuracy was just 79 per cent. Before the termination of the 192 service, BT claimed an accuracy rate of 99 per cent for its flat-rate 40p calls.

Only half of the top 30 telephone directory inquiries providers in Britain charge less than the minimum cost of a service offered by BT when it enjoyed a monopoly in the sector, the study by Ofcom found in June.

Telecoms operators claim that they have been forced to raise prices to compensate for decreased call volumes and higher advertising costs. The regulator also discovered that a quarter of people were using directory services less frequently now, with almost one in ten giving it up completely. In total, the number of calls to 118 services is down by about 45 per cent, from 6.75 million to 3.7 million a week.

A spokeswoman for Ofcom said: “We are engaged in a constructive dialogue with the NAO about directory inquiries liberalisation, deregulation and implementation and look forward to its report.”

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