BT deal with MCI gets Cruickshank's backing

British Telecom's drive to obtain approval in the US for its pounds 12bn takeover of long-distance operator MCI was given a significant boost yesterday by Don Cruickshank, the UK industry regulator, writes Chris Godsmark.

In a speech in Washington last night he comprehensively demolished the attack on the merger launched by AT&T, arguing that Britain offered competitive opportunities for new telephone companies which were "equal to any in the world, if not better".

The comments came as merger documents filed in the US showed the two top MCI executives will receive a $130m (pounds 80m) bonanza of share options if the deal succeeds.

Without naming BT or AT&T directly, Mr Cruickshank attacked claims from the US that it was difficult for rival operators to gain access to the British market. The US regulator, the Federal Communications Commission, has said it will only approve the merger if it can be demonstrated that US carriers have as much chance of breaking into the UK market as British operators will have in America.

AT&T, which is expanding its UK operations, claims it has been hampered by the UK's "indirect access" system, where its customers have to dial a three-digit code to get access to the company's long-distance services. The US carrier argues that BT's dominance of local residential phone lines means rival operators will always face a competitive disadvantage. In the US long-distance carriers enjoy direct access to customers, a system known as dialling parity.

However, Mr Cruickshank said the indirect access policy was the only way to encourage the cable companies to build local phone networks. He said: "This is perhaps the difference between our two regulatory frameworks which it is hardest for Americans to understand ... For the UK dialling parity is not the linchpin of market opening. Far from it."

Though the comments were also a clear defence of Mr Cruickshank's own record, they were welcomed by BT sources. An AT&T spokesman declined to comment, though the speech is likely to be viewed by the group as a significant setback.