AT&T steps up attack on BT takeover

The US telephone giant, AT&T, will today intensify its onslaught on the proposed pounds 12bn take over of rival MCI by British Telecom with a strong attack on the way the UK phone market is regulated.

Merrill Tutton, head of AT&T's British operations, will tell a conference of managers who run large company phone networks that the market is in danger of being carved up by BT and Cable & Wireless into a new duopoly.

The attack is likely to put further pressure on Don Cruickshank, the industry regulator, as he discusses approving the BT-MCI link-up with his counterparts in the US watchdog, the Federal Communications Commission.

The FCC has already made clear that it will only give BT the go-ahead to increase its stake in MCI from 20 per cent to 100 per cent if it can prove that the British phone market is as liberal as the US market.

Elaborating on the criticism already made by AT&T's chairman, Robert Allen, Mr Tutton will tell delegates that the key principle behind competition in the UK, which encourages operators to build rival cable networks, is acting as a barrier to genuine customer choice.

Although several firms have constructed national trunk networks since deregulation in 1991, BT still controls its local infrastructure, which takes phone wires to the home. In addition, cable companies are constructing their own local networks, some of which will be merged with Mercury's trunk system when Cable & Wireless's pounds 5bn deal with Nynex CableComms, Bell Cablemedia and Videotron is completed next April.

However, AT&T has complained that its UK customers can only use its service after first dialling a special code to gain access to the network.

The "indirect access" principle also means customers have two bills, one from the long-distance company and one from BT for use of the local infrastructure.

In the US, all operator firms have equal access through local phone companies, the so-called baby bells. "The technical barriers to moving from indirect access to equal access in the UK are not difficult. It's the political will to do it that's needed," said an AT&T source.

The US group launched its first UK service in January and has signed up some 800 business customers, including Rover and Texaco, and an undisclosed number of residential users.

However, both Oftel and the Government are likely to reject the criticisms on the grounds that deregulation in the UK has succeeded in bringing billions of pounds of investment in the local cable networks.