BT climbs down over Oftel's trading plans

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After a dramatic round of eleventh-hour negotiations, the board of BT late last night capitulated in its long-running feud with Oftel, and accepted the regulator's proposal to take on new powers to ban anti- competitive behaviour.

The decision, which came after hours of intense discussion and a last- minute meeting between the regulator, Don Cruickshank, and BT's chief executive, Sir Peter Bonfield, means the company has averted a risky and costly referral to the Monopolies and Mergers Commission.

BT's chairman, Sir Iain Vallance, said: "It has been widely known that BT was uncomfortable with the proposals made by Oftel.... However, we are pleased that Oftel has come forward with revised proposals to meet the company's main concerns."

However, Oftel said the changes made "no difference" to the basic thrust of the proposals. An advisory body of experts will give advice to Mr Cruickshank on complaints about anti-competitive behaviour. Oftel said BT would not be able to raise complaints itself with the panel, which will be appointed by Mr Cruickshank, and the decisions it takes will not be binding.

The fair-trading powers, which will come into force earlier than originally planned, would give the regulator the power to ban actions by BT which he fears could impede competition. Mr Cruickshank has linked the changes to more generous price controls, beginning next August, which have been accepted by BT. The four-year price formula will remove most business customers and some high spending residential customers from the price cap. Homes still covered by price controls would see bills increase by no more than 4.5 per cent below the rate of inflation.

BT's climb-down comes after it had fiercely opposed the new powers on the grounds that they included no right of appeal against Oftel's decisions. Late last year, Sir Iain Vallance described the plans as "highly dangerous," arguing they would make Mr Cruickshank judge and jury over the company's affairs. Oftel insisted that the decision not to include a right of appeal was necessary because the new powers would not be backed up by a system of fines and compensation.

In an intense lobbying effort, BT had hoped to persuade the Government to broker a compromise by amending telecom- munications legislation to include an appeals mechanism. The President of the Board of Trade, Ian Lang, is known to have considered this, though no decisions are thought to have been taken.

Another option open to BT was to seek a judicial review against Mr Cruickshank's plans. BT said last night it would seek a court ruling into whether they were lawful, but "given that BT and Oftel have agreed to the modifications, we hope that these processes will be uncontentious".

The decision by BT to accept the proposals will delight consumer groups and many of its competitors. Hans Snook, group managing director of Orange, the mobile phone company, said: "Not only are we in favour of the changes, but we are actively fighting for a level playing field with BT. We are highly supportive of anything which provides this."

Cable operators have welcomed the plans as they continue to allege BT is engaged in a so-called "dirty-tricks" campaign to persuade ex-customers to return to the company. Bell Cable Media said it had received 15 complaints last month about BT's marketing team. BT has vehemently denied suggestions that its staff have spread misinformation about cable companies.

The head of the Cable Communications Association, Bob Frost, backed Oftel's proposals yesterday. He explained: "There's the very strong need for Oftel to have the capacity to control these problems. We believe very strongly that the powers are necessary."