Oftel seeks ways to curb BT price cuts

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The Independent Online
Oftel, the telecommunications regulator, is seeking wide new powers to prevent BT from behaving in anti-competitive ways and in particular from cutting prices in ways that could push rivals out of the marketplace. The regulator is concerned that BT couldin future use cross-subsidy to price some services below cost.

Don Cruickshank, director-general of Oftel, also said he wanted more powers to obtain information on BT's individual businesses, in order to ensure that cross-subsidy cannot be hidden. He said that if necessary, this could mean forcing BT to split into separate businesses rather than just publishing separate accounts.

Speaking at a London conference, Mr Cruickshank said: "I would not be performing my role effectively if I allowed a situation to develop where anti-competitive behaviour by BT is either not discoverable or that I do not have adequate means to stop it promptly."

The wider powers proposed by Mr Cruickshank would mean a change to BT's licence, to which the company must agree or face a reference to the Monopolies Commission.

Oftel said that the changes, part of a comprehensive consultation on the future of the industry, would not take effect until after July 1997, the expiry date for BT's current price cap.

Mr Cruickshank also promised more "scrutiny and challenge" in assessing pricing and related behaviour, adding: "We can use more effectively the powers under the Competition Act and Fair Trading Act. Indeed, I expect that you will see the first use of these powers by the director general of telecommunications in the very near future."

Mr Cruickshank's statement shocked BT, which has already agreed that it will publish separate accounts to increase transparency. Accounting separation is regarded by Oftel as a key part of ensuring that other companies, including Mercury and cable television firms, can interconnect on fair terms to BT's wires to deliver service to customers.

BT said: "The full range of unfettered discretionary powers now being sought by Oftel ... go substantially further than is required to achieve accounting separation.

"They are much more extensive than anything to which BT has previously consented, in agreeing amendments to its licence. Wide discretionary powers, by their nature, introduce uncertainty and unpredictablity into the regulatory regime. This is not in the interest of customers, shareholders or competitors."

BT also came under fire from the regulator for failing to take part openly in its consultation on accounting separation, preferring to discuss the issues with Oftel in private. Mr Cruickshank said: "The result has been a lack of transparency, a lack of understanding by the rest of the industry of what BT's position is, and frankly the suspicion of Oftel/BT in a closed room."