well, I'm biased here as I work for the post office, and we have our own rival homephone service which is cheaper than BT's.
I believe that before they tie you into a new contract they have to advise you of that in writing. it's similar to last year when they changed their package options and automatically out people on new ones, with a new contract period. A call to the ombudsman or a good google search should confirm this.
as well as the PO, talk talk, virgin etc can provide your service. As long as you have a phone socket in the house, it's fine. we all use the same cables etc, it's just that BT had to open up the lines to their competition.
BT and talk talk's charges are going up very soon. our line renatl is £12.50 a month, and you're only tied to a 3mth rolling contract. I've no idea about virgin's prices.
good luck