BT squeezes suppliers

Chief demands 20% price cuts after regulator proposes new curbs

SIR Peter Bonfield, chief executive of British Telecom, is demanding price cuts of up to 20 per cent from his equipment suppliers in the wake of last week's proposed clampdown by the regulator Oftel.

Hardware manufacturers such as GEC, Siemens and Northern Telecom could be badly squeezed, along with their components suppliers, and a tail of smaller equipment makers. BT spends pounds 2.5bn a year on capital investment, much of it with equipment suppliers.

Sir Peter, who was drafted in from computer maker ICL in January, said at the weekend that the cost of telephone hardware has not fallen as fast as similar equipment in the computer sector. "We've told all our suppliers their product prices are out of line by 10 to 20 per cent."

Such cuts could be obtained if the industry were restructured in the way computers were in the early 1980s. "We need more standardisation at the hardware level and more open systems," he said. "Right now most of the equipment is proprietary."

Open systems were introduced when IBM decided to publish its specifications for PCs, allowing other manufacturers to clone the hardware under licence and encouraging programmers to write software that took full advantage of the design's characteristics. As a result, PCs have swamped the market, threatening to sink Apple, which stuck to a proprietary system.

Britain's largest telecoms supplier, GPT, a joint venture between GEC and Germany's Siemens, would not comment on Sir Peter's call, but Northern Telecom, a Canadian manufacturer of switching equipment, said it has "very rapidly gotten engaged with his people to find ways to reduce BT's costs".

The company agreed with his vision of the industry and said it was already moving in the direction of an open systems architecture. "We're absolutely in sync with him on this," said a company spokesman.

The move shift should lead to more advanced equipment, although it takes far longer to introduce better gear into a tele- communications network than it does to replace a computer system. "We've got a patchwork quilt of different technologies that we have to manage," said Sir Peter. "If we were starting out as a green-field business, we wouldn't have some of the equipment that we do have."

David Yedwab, a telecoms consultant based in Parsippany, New Jersey, predicted that the first pieces of equipment designed for a standardised, open communications system will probably be available by the end of the decade, and a full set five years later, but he agreed that it will take much longer to replace established phone networks with a fully integrated system. "Until now there has been no real demand from service providers."

Sir Peter's demands have partly been sparked by the tougher stance being taken by Don Cruickshank, director-general of Oftel. His latest consultative paper, published on Wednesday, called for customers to save 27 per cent on their bills - equivalent to pounds 80 a year off an average bill. BT's chairman, Sir Iain Vallance, has described the regulator as "prosecutor, judge, jury and executioner".

The next paper, Fair Trading in the Telecommunications Market, will set out Mr Cruickshank's demand for the power to fine anti-competitive practices, and to call an instant halt to predatory pricing. At present, he has the power to investigate cases of predatory pricing, but one industry insider said: "The best he can do amounts to little more than a rap over the knuckles."

BT's first response to win back some of the lost ground will be to refuse to accept the report's findings. That will automatically prompt an inquiry by the Monopolies and Mergers Commission, which will take up to six months to report. It would be a no-lose move for BT, as the commission could only reduce Mr Cruickshank's demands.

If BT's campaign against the regulator flags, it could follow another privatised utility, British Gas, down the path to demerger. "It's a possibility, even if it's quite a long way off at this point," said one City analyst.

Start your day with The Independent, sign up for daily news emails
Arts and Entertainment
The teaser trailer has provoked more questions than answers
filmBut what is Bond's 'secret' that Moneypenny is talking about?
Sport
football This was Kane’s night, even if he played just a small part of it
Travel
travel Dreamland Margate, Britain’s oldest amusement park, is set to reopen
News
news
News
Founders James Brown and Tim Southwell with a mock-up of the first ever ‘Loaded’ magazine in 1994
media
News
Threlfall says: 'I am a guardian of the reality keys. I think I drive directors nuts'
people
Voices
voices The group has just unveiled a billion dollar plan to help nurse the British countryside back to health
News
The Westgate, a gay pub in the centre of Gloucester which played host to drag queens, has closed
news
ebooks
ebooksA special investigation by Andy McSmith
  • Get to the point
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

Recruitment Genius: Retirement Coordinator - Financial Services

Negotiable: Recruitment Genius: To provide a prompt, friendly and efficient se...

Recruitment Genius: Annuities / Pensions Administrator

Negotiable: Recruitment Genius: You will be the first point of contact for all...

Ashdown Group: HR, Payroll & Benefits Officer - Altrincham - up to £24,000.

£18000 - £24000 per annum + benefits: Ashdown Group: HR, Payroll & Benefits Of...

Ashdown Group: Learning and Development Programme Manager

£35000 - £38000 per annum + benefits : Ashdown Group: A highly successful, int...

Day In a Page

The saffron censorship that governs India: Why national pride and religious sentiment trump freedom of expression

The saffron censorship that governs India

Zareer Masani reveals why national pride and religious sentiment trump freedom of expression
Prince Charles' 'black spider' letters to be published 'within weeks'

Prince Charles' 'black spider' letters to be published 'within weeks'

Supreme Court rules Dominic Grieve's ministerial veto was invalid
Distressed Zayn Malik fans are cutting themselves - how did fandom get so dark?

How did fandom get so dark?

Grief over Zayn Malik's exit from One Direction seemed amusing until stories of mass 'cutting' emerged. Experts tell Gillian Orr the distress is real, and the girls need support
The galaxy collisions that shed light on unseen parallel Universe

The cosmic collisions that have shed light on unseen parallel Universe

Dark matter study gives scientists insight into mystery of space
The Swedes are adding a gender-neutral pronoun to their dictionary

Swedes introduce gender-neutral pronoun

Why, asks Simon Usborne, must English still struggle awkwardly with the likes of 's/he' and 'they'?
Disney's mega money-making formula: 'Human' remakes of cartoon classics are part of a lucrative, long-term creative plan

Disney's mega money-making formula

'Human' remakes of cartoon classics are part of a lucrative, long-term creative plan
Lobster has gone mainstream with supermarket bargains for £10 or less - but is it any good?

Lobster has gone mainstream

Anthea Gerrie, raised on meaty specimens from the waters around Maine, reveals how to cook up an affordable feast
Easter 2015: 14 best decorations

14 best Easter decorations

Get into the Easter spirit with our pick of accessories, ornaments and tableware
Paul Scholes column: Gareth Bale would be a perfect fit at Manchester United and could turn them into serious title contenders next season

Paul Scholes column

Gareth Bale would be a perfect fit at Manchester United and could turn them into serious title contenders next season
Inside the Kansas greenhouses where Monsanto is 'playing God' with the future of the planet

The future of GM

The greenhouses where Monsanto 'plays God' with the future of the planet
Britain's mild winters could be numbered: why global warming is leaving UK chillier

Britain's mild winters could be numbered

Gulf Stream is slowing down faster than ever, scientists say
Government gives £250,000 to Independent appeal

Government gives £250,000 to Independent appeal

Donation brings total raised by Homeless Veterans campaign to at least £1.25m
Oh dear, the most borrowed book at Bank of England library doesn't inspire confidence

The most borrowed book at Bank of England library? Oh dear

The book's fifth edition is used for Edexcel exams
Cowslips vs honeysuckle: The hunt for the UK’s favourite wildflower

Cowslips vs honeysuckle

It's the hunt for UK’s favourite wildflower
Child abuse scandal: Did a botched blackmail attempt by South African intelligence help Cyril Smith escape justice?

Did a botched blackmail attempt help Cyril Smith escape justice?

A fresh twist reveals the Liberal MP was targeted by the notorious South African intelligence agency Boss