Energis cries foul over BT's US merger

Energis, the fast-growing telephones operator owned by National Grid, yesterday unexpectedly lodged a formal objection with the US telecommunications regulator against British Telecom's planned pounds 13bn merger with the American long-distance carrier MCI.

It also emerged that Energis has submitted similarly critical arguments to the European Commission, which is also investigating the deal. Energis is one of the first of BT's British rivals to complain formally about the merger and its move backs the campaign launched in the US by MCI's bitter rival, AT&T.

In its letter to the US regulator, the Federal Communications Commission (FCC), Energis argues that the British phone market is not as free as BT has claimed. Echoing AT&T's complaints about obstacles facing its UK operations, the submission says BT is "still the dominant player with 92 per cent of residential lines and a similar proportion of business lines".

The submission attacks the British system which enables competing long- distance phone companies to pay to obtain access to homes using BT's dominant local network, a principle known as "indirect access".

Customers with companies such as Energis and AT&T have to dial a three- figure code from their BT phone to access these rival networks, and receive two sets of bills. In contrast the US system works on the principle of "equal access", where customers do not need to dial an access code and only receive a bill from their chosen long-distance supplier.

Mike Grabiner, Energis chief executive, said: "It's wrong to see the UK market as fully liberalised. It is not and this is a critical weakness. Without equal access we cannot address the residential market directly, so the problem is absolutely fundamental. It stops us getting into the residential market."

He said the indirect access regime would prevent Energis customers from enjoying the variety of different billing options and special call services supplied by BT. As a result, Mr Grabiner argued, Energis had decided to concentrate its efforts solely on the business market, where hi-tech switchboards can overcome some of these drawbacks.

The latest move is likely to add to pressure on both BT and the UK industry regulator, Don Cruickshank. BT has claimed that the UK market is the most open in the world and has been strongly backed by Mr Cruickshank. In a speech in Washington recently he defended his regulatory record, arguing that indirect access was the only way to encourage the cable companies to invest in rival local telephone networks.