Labour thinks again about ending BT ban

The Labour Party is retreating from its policy to allow an early end to the ban on British Telecom broadcasting entertainment down its phone lines after fears by shadow ministers that the approach could kill off the cable companies.

In a clear shift in its approach, Labour has signalled a much more sympathetic stance towards the cable companies after a new and serious threat to their business emerged in the shape of digital terrestrial television. The move will be met with huge relief in the cable industry which has spent two years intensively lobbying Labour on the issue.

At its party conference in 1995 Labour stunned the cable companies by revealing an agreement giving BT, chaired by Sir Iain Vallance, a phased end to the broadcast ban in return for the group's commitment to extend fibre-optic "superhighway" links into schools.

An influential report a couple of years ago by the Trade and Industry Select Committee also suggested the ban should be reviewed in 1998, giving rise to the possibility that the restriction would be lifted.

There were howls of protest from cable companies on the grounds that allowing BT to compete in the television market would prejudice their pounds 12bn, 10-year, investment programme to homes. So far about half the cash has been spent. The Government's policy is to wait until 2001 to review the ban, with no guarantee that it will be removed.

However Geoff Hoon, the Labour technology spokesman, said yesterday that the whole industry had changed rapidly since the original "deal" with BT. "Digital satellite television and digital terrestrial television are going to make a fundamental difference. If I was a cable company I'd be seriously nervous at the moment."

He also suggested BT's priorities in offering television services using sophisticated computer compression technology may have changed. "The other question here is what BT now wants. In their recent trials of interactive television in Colchester they seem to have found people didn't want to sign up for movies through the service. They seem to be evaluating the future for the project."

Though the trials to 2,500 homes ended last June, BT has yet to decide the future of the technology. One suggestion is that it is much more likely to be used to provide high-speed Internet access services through copper phone wires than broadcast entertainment.

Mr Hoon said Labour was still committed to reviewing the ban next year if the party wins power, but it would do so in the light of new developments in the telecommunications industry. A favourable outcome for the group now seems much less likely. However Mr Hoon insisted the schools agreement with BT still stood.

The threat from digital terrestrial television, which bypasses cable or satellite delivery methods, has already hit cable share prices heavily. Rupert Murdoch's BSkyB has linked with Granada and Carlton to bid for a licence to offer a block of digital services using the technology. BT also has links with BSkyB and one theory was that the telephones giant may have abandoned its television ambitions for fear of damaging its links with the satellite operator.

The Trade and Industry Select Committee is also reviewing its approach to the broadcast ban and held hearings with BT and the cable operators last week. Labour's policy was broadly modelled on the committee's previous conclusions.

Martin O'Neill, committee chairman and a Labour MP, said it would be wrong to characterise the move as a shift of direction.

]However he said one question which would feature in the committee's conclusions was whether the ban had actually prevented BT from investing heavily in fibre-optic links. He added:

"The truth is that BT has invested quite a lot anyway. Circumstances have changed since our last report and the ban is not so much of a problem."