BT goes to court over watchdog's new powers

British Telecom yesterday began its long-awaited High Court challenge against controversial moves by Don Cruickshank, the industry regulator, to take on wide-ranging powers to ban anti-competitive behaviour.

However, as the judicial review got under way it emerged that Mr Cruickshank could reopen a tough four-year price regime for BT's residential customers, which he has tied to the new fair trading powers, if the company won the court case.

An Oftel spokesman confirmed that the regulator could look again at the price formula, which cuts domestic phone bills by 4.5 per cent a year from next August until July 2001. It also excludes almost all business customers for the first time on the grounds that competition in the business phone market is already well established.

In court Roger Henderson QC, representing BT, attacked the new licence conditions which he claimed would give Mr Cruickshank much wider powers than those envisaged by Parliament when it passed the law which defined the role of Oftel, the watchdog, at privatisation in 1984.

The outcome of the judicial review is also likely to influence the future direction of the UK regulatory system and has implications for the Government's broader competition policy. The proposals draw heavily from European competition law, which the Government has recently delayed introducing into the UK.

The new powers, which come into effect from 31 December, enable Mr Cruickshank to move much more quickly on any action by BT or other telecoms companies which he decided was anti-competitive. They would replace the current system based on many individual licence conditions designed to stamp out specific actions such as the requirement to provide itemised billing for customers or a system for making calls to the emergency services.

BT accepted the measures in the summer at the eleventh hour, narrowly averting a full-blown investigation by the Monopolies and Mergers Commission, in one of the most bitter disputes ever between the company and its regulator.

Approval by BT came after Sir Peter Bonfield, chief executive, secured what he claimed was a key concession, where Mr Cruickshank agreed to appoint an advisory body to vet his decisions.

However, the group of four experts, which will be chaired by Jeremy Lever QC, a former leading competition lawyer, has no power to enforce any of its recommendations. In court yesterday BT labelled the advisory group a "shadow of the Monopolies and Mergers Commission" with no power to making binding rulings. Describing the advisory board as a "neutered body", Mr Henderson argued that "checks and balances are not what they appear".

Though BT has accepted the new powers and the package of price controls, the company claimed it had a duty to mount the legal challenge to protect its shareholders. The action is supported by Vodafone, Britain's leading mobile phone operator, which believes the changes concentrate too much power in the hands of one person.

The main thrust of BT's attack was on the scale and subjective nature of Mr Cruickshank's new powers, which the company claimed would elevate him above the existing overall competition watchdog, the Office of Fair Trading. Indulging in liberal cricketing metaphors, Mr Henderson said: "Effectively we're getting a second wicket keeper."

He said Oftel would regard BT "as in a dominant position across the board" because of its near monopoly of local domestic services. The burden would constantly be on BT to prove its strategy was not designed to thwart competition.