The row is the latest evidence that intense competition for phone customers is leading to claims of dubious marketing tactics flying between rival operators. Oftel yesterday confirmed it had received a complaint and was investigating. A spokeswoman said: "It's something we are aware of and have been looking into. Ionica has been taking the allegations very seriously."
Ionica refused to reveal the identity of the cable company involved, though it is thought to be Bell Cablemedia, one of the UK's largest operators which is soon to merge into Cable & Wireless's pounds 5bn cable group. Earlier this year Bell faced complaints about its poster advertising campaign which lambasted British Telecom's huge profits under slogans such as "British Telecon". The posters were investigated by the Advertising Standards Authority.
An Ionica spokesman said: "We weren't unduly surprised by this development because competition is becoming so tough. We just want to ensure there is fair play across the industry."
The row mirrors a simmering dispute between BT and the cable industry last year over allegations that BT was engaged in a "dirty tricks" campaign to spread damaging information about cable networks. Oftel said the intense competition developing emphasised the importance of its new fair trading licence condition, which enables the regulator to ban swiftly any behaviour he believes would damage competition. Don Cruickshank, the regulator, recently moved to extend the powers from BT to the rest of the industry.
The latest allegations to Oftel stated that the cable operator's customer sales representatives had warned that an Ionica phone would be susceptible to the same reception problems as a mobile phone. Ionica, headed by chief executive Nigel Playford, was the first group to launch a phone service using fixed radio access. Though the telephone works in the same way as a conventional fixed line, the signal is sent from an ariel on the side of a house to a base station a few kilometres away. It then goes into the underground wire network, mostly using capacity leased off other operators.
The Ionica spokesman said the company had received calls from consumers concerned at possible reception difficulties. He added there was no substance to any claims of problems with signal quality.
"They are just trying to put fear into consumers' minds. We brought Oftel into this to underline how seriously we are taking it. Clearly the cable companies feel they are under a fair degree of pressure at the moment. We met with the cable company involved at a senior level last week and received assurances that they'd take the appropriate steps within their organisation."
The row is all the more surprising given that Ionica has not targeted cable customers directly in its advertising, preferring to concentrate on eroding BT's dominant market share. Though its marketing budget is small by BT standards Ionica claims response to its television advertising campaign has been beyond expectations.
Since its launch Ionica has signed up more than 15,000 customers out of about 700,000 able to take up the service. The company, which aims to float on the stock market later this year, has also announced plans to take on 600 more staff.