Oftel expected to lift BT's rental limit
Monday 13 March 1995
Oftel, the telecommunications regulator, is expected to propose within months that the cap on BT's line rental prices should be removed. The controversial change is likely to be put to BT in a statement on the industry by June.
The move will be resisted by consumer groups unless reassurances are given that prices for many customers, including the elderly and less well- off, will not soar. BT believes that it loses well in excess of £1.4bn a year in maintaining the local network. The company has lobbied for years to be able to accelerate increases in line rental charges, saying that call charges could then go down.
Philip Cullum, policy research manager at the Consumers' Association, said: "We need reassurances that individual customers will not see their bills rocket."
He called on BT to say what it might do if the line rental cap was removed, "in a spirit of openness". "If BT were to say something it would help. They could say that overall bills will not go up," he said. "We need to be sure that consumers will not be adversely affected and clearly if we have doubts we will oppose [raising the price cap]."
In spite of consumer concern, Don Cruickshank, director-general of Oftel, is increasingly convinced that BT will not raise line rental charges unduly if he removes the cap and that overall bills may not go up. He believes that competition from cable companies and other telephone companies, including the Cambridge-based Ionica, would deter BT from taking the risk of losing customers.
Mr Cruickshank would also propose adapting the current low-use scheme to help anyone disadvantaged by the change. Under this scheme people pay only 40 per cent of line rentals but then pay a higher charge for calls. In any case the overall price cap limiting changes to inflation minus 7.5 percentage points will stay in place until 1997.
The move to lift BT's line rental limit is part of a potentially radical overhaul of the industry, which could include removal of large sums paid to BT to help compensate the company for losses in its local networks. Oftel is consulting on a wide range of issues on the future of the industry and responses are due in by the end of this month.
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