The Royal Mail has launched a directory enquiries service which it says will undercut rivals like 118 118 and BT.
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.
Expensive
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.
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