BT ordered to pay bulk of pounds 220m switching costs

Across the wire: Squabble with regulator follows MMC's ruling on customers who change phone systems

BT was yesterday told to pay the bulk of the pounds 220m of costs when customers switch to its competitors but wish to keep their existing telephone numbers.

The decision by the Monopolies and Mergers Commission will cost BT pounds 150m and the cable companies and other competitors pounds 60m over the next five years.

But its real significance is that it could herald a sharply increased flight of customers away from the telecoms giant.

The decision led to a day of bitter squabbling between BT and Don Cruickshank, the telecoms regulator, over which side had won an argument about who pays for so-called "number portability."

Each side also claimed that the precedents set by the MMC's decision foretold victory in important regulatory battles to come, including a key argument over interconnection charges in the telephone network, which is expected to be sent to the MMC.

The City appeared marginally more sympathetic to the BT view and marked the shares up 5.5p to 348.5p, on the grounds that the situation had been clarified by the MMC.

Ian Morfett, director of network services and pricing at BT, agreed that the current 50,000 customers lost each month to cable companies would rise but he rejected suggestions that they would double.

The first switches will be made under the new system from next spring and it will be in full operation in 1997.

Cable companies will have to pay BT pounds 8 to pounds 12 every time they win a customer and BT will be entitled to charge the same if it woos them back.

But the biggest cost for BT will be in financing the system changes that make portability possible. Industry experts expect the competing sides to absorb most or all of the cost in their general overheads, rather than add it directly to the bills of new customers won from other companies.

Mr Cruickshank has long argued that number portability is essential to increasing competition in telecommunications. Both he and the cable industry believe BT has been dragging its heels.

He said he was pleased that the MMC had endorsed his view that number portability was in the public interest and that BT should not be able to recover all the costs from other operators, as its licence provided at present.

Mr Cruickshank added: "The MMC's detailed recommendation of the allocation of costs between BT and other operators is very close to my original proposal, which would have resulted in a 75:25 split of BT's total portability costs over the next five years."

He said the MMC had recommended a 70:30 split and he alleged that BT's best offer to date would have resulted in a split the other way round, of 15:85 in its favour.

He further claimed that BT's estimates for the total cost of portability had fallen considerably during the course of the MMC inquiry from pounds 557m to pounds 220m.

Mr Morfett said he failed to recognise any of the numbers put forward by Mr Cruickshank to back his claim that the MMC had backed the regulator's line, including the proposed 75:25 split of the costs.

Suggesting that the regulator had in fact been defeated in a campaign to get BT to pay everything, BT said: "Other telephone companies will now have to pay a share of the cost of implementing number portability. BT will be up to pounds 60m better off." Dr Alan Rudge, BT managing director, also said: "Our decision to push for an MMC reference has been vindicated" and he denied that BT had ever opposed number portability.

The Cable Communications Association reacted with delight to the MMC report, saying: "They knew they would ultimately lose but they have tried as long as possible to postpone the evil day."

Mercury Communications said the report was an important step towards effective competition in the UK telecoms market.

Comment, page 21

Start your day with The Independent, sign up for daily news emails
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Guru Careers: Pricing Analyst

£30 - 35k: Guru Careers: We are seeking a Pricing Analyst to join a leading e-...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £45K YR1: SThree: At SThree, we like to be dif...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + competitive: SThree: Did you know? SThree is a mul...

Guru Careers: C# Project Team Lead

£55 - 65k (DOE): Guru Careers: A unique opportunity for a permanent C# Develop...

Day In a Page

Fifa corruption: The 161-page dossier that exposes the organisation's dark heart

The 161-page dossier that exposes Fifa's dark heart

How did a group of corrupt officials turn football’s governing body into what was, in essence, a criminal enterprise? Chris Green and David Connett reveal all
Mediterranean migrant crisis: 'If Europe thinks bombing boats will stop smuggling, it will not. We will defend ourselves,' says Tripoli PM

Exclusive interview with Tripoli PM Khalifa al-Ghweil

'If Europe thinks bombing boats will stop smuggling, it will not. We will defend ourselves'
Raymond Chandler's Los Angeles: How the author foretold the Californian water crisis

Raymond Chandler's Los Angeles

How the author foretold the Californian water crisis
Chinese artist who posted funny image of President Xi Jinping facing five years in prison as authorities crackdown on dissent in the arts

Art attack

Chinese artist who posted funny image of President Xi Jinping facing five years in prison
Marc Jacobs is putting Cher in the limelight as the face of his latest campaign

Cher is the new face of Marc Jacobs

Alexander Fury explains why designers are turning to august stars to front their lines
Parents of six-year-old who beat leukaemia plan to climb Ben Nevis for cancer charity

'I'm climbing Ben Nevis for my daughter'

Karen Attwood's young daughter Yasmin beat cancer. Now her family is about to take on a new challenge - scaling Ben Nevis to help other children
10 best wedding gift ideas

It's that time of year again... 10 best wedding gift ideas

Forget that fancy toaster, we've gone off-list to find memorable gifts that will last a lifetime
Paul Scholes column: With the Premier League over for another year, here are my end of season awards

Paul Scholes column

With the Premier League over for another year, here are my end of season awards
Heysel disaster 30th anniversary: Liverpool have seen too much tragedy to forget fateful day in Belgium

Liverpool have seen too much tragedy to forget Heysel

Thirty years ago, 39 fans waiting to watch a European Cup final died as a result of a fatal cocktail of circumstances. Ian Herbert looks at how a club dealt with this tragedy
Amir Khan vs Chris Algieri: Khan’s audition for Floyd Mayweather may turn into a no-win situation, says Frank Warren

Khan’s audition for Mayweather may turn into a no-win situation

The Bolton fighter could be damned if he dazzles and damned if he doesn’t against Algieri, the man last seen being decked six times by Pacquiao, says Frank Warren
Blundering Tony Blair quits as Middle East peace envoy – only Israel will miss him

Blundering Blair quits as Middle East peace envoy – only Israel will miss him

For Arabs – and for Britons who lost their loved ones in his shambolic war in Iraq – his appointment was an insult, says Robert Fisk
Fifa corruption arrests: All hail the Feds for riding to football's rescue

Fifa corruption arrests

All hail the Feds for riding to football's rescue, says Ian Herbert
Isis in Syria: The Kurdish enclave still resisting the tyranny of President Assad and militant fighters

The Kurdish enclave still resisting the tyranny of Assad and Isis

In Syrian Kurdish cantons along the Turkish border, the progressive aims of the 2011 uprising are being enacted despite the war. Patrick Cockburn returns to Amuda
How I survived Cambodia's Killing Fields: Acclaimed surgeon SreyRam Kuy celebrates her mother's determination to escape the US

How I survived Cambodia's Killing Fields

Acclaimed surgeon SreyRam Kuy celebrates her mother's determination to escape to the US
Stephen Mangan interview: From posh buffoon to pregnant dad, the actor has quite a range

How Stephen Mangan got his range

Posh buffoon, hapless writer, pregnant dad - Mangan is certainly a versatile actor