Oftel proposals `could send line rentals soaring'

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The Independent Online
Telephone line rental charges could soar under proposals by the industry regulator, Oftel, to relax controls, according to the Consumers' Association. The CA attacked Oftel's case - that relaxing rental price controls would not result in significa ntly higher charges - as "sketchy and unconvincing".

Philip Cullum, policy research manager, said: "Oftel is in effect saying that BT are too nice to do it and I do not think that they are."

Mr Cullum was speaking last week at an Oftel public consultation session on proposals for changes in the regulatory regime. Oftel questions the need for the cap that keeps line rental charges to inflation plus 2 percentage points.

The regulator believes that BT would not want to run the risk of losing or upsetting customers. It also says that because line rentals also fall within the overall cap on the BT basket of charges, the effect of any line rental increases would be offset by cuts in the price of other services and would not have much impact on residential customers' bills. BT's overall control is to keep price changes within inflation minus 7.5 percentage points.

Mr Cullum argues that BT could sharply increase rentals and offset this with cuts that benefit business customers, leaving households disadvantaged. "There is virtually no competition in line rentals and it is where the customer has no alternative that BT will be least bothered about upsetting them," he said.

Don Cruickshank, director-general of Oftel, said that his views were founded in comprehensive research, and he has invited the CA to meet him. "These conclusions are factually based," he said.

Mr Cruickshank has stressed that this and other proposals for change form the basis of a consultation and that he wants a wide-ranging public debate before decisions are taken.

Mr Cullum, who hopes to contact Oftel this week, said: "We remain to be persuaded. If BT can be trusted so much, why regulate it at all?

"In the past BT has shown that it favours business customers (in deciding price changes) and there is danger it would do so again," he said.

Earlier this month BT announced a 4.6 increase in line rental charges, which takes effect on Wednesday. At the same time the company said it would cut the cost of some international calls. BT has argued for the ability to increase line rental charges much more quickly as it believes that it loses more than £1bn a year in providing and maintaining local networks.