The Royal Mail has launched a directory enquiries service which it says will undercut rivals like 118 118 and BT.
The Post Office claims its new directory service is cheaper
From Monday, the Post Office 11 88 55 service will charge a 40p flat charge for up to two searches.
The service, which the Post Office says is cheaper than the six most popular rival services, could trigger a price war in the industry.
The loss-making division has moved into areas such as credit cards and telecoms as it looks to make a profit.
The directory enquiries industry is worth an estimate £170m a year.
A Post Office survey found that one in three people think current services are expensive.
"Providing a better choice was meant to give a better deal, but people have been disappointed," said Simon Carter, head of Post Office Home Phone.
The six most popular services handle 90% of the estimated 300 million directory enquiry calls made each year.
BT's 118 500 service charges a 40p connection fee, followed by a 23p per minute charge after the first 60 seconds.
A spokesman for the company said BT had no immediate plans to change its pricing structure.
The Post Office already has a presence in the telecoms market, having launched its Home Phone residential service in 2005.
It claims Home Phone is now signing up more than 4,000 customers a day.