The change in licensing policy will impose fewer demands on new market entrants than previously envisaged. In particular, the newcomers, unlike BT, are not expected to have any social or universal service obligations within their licence areas.
This change is likely to anger BT, which has over 90 per cent of the domestic telephone market, as it could allow new telecoms companies to concentrate on more profitable customers.
Simpler and less demanding licence conditions may also be applied in future to Mercury and the cable television companies, according to Oftel.
Bill Wigglesworth, deputy director general of Oftel, said: 'What we are seeing is a shift in licensing in the wake of the BT/Mercury duopoly review. When you move to unlimited competition, market dominance is the issue. That means BT should be licensed more tightly.'
Oftel said the first of these simpler licences had been granted to Ionica, a Cambridge-based company that will offer telephone services to homes and small businesses.
Telecoms licences have also been issued to Telecom Electric, part of the National Grid Company, and to Scottish Power and Scottish HydroElectric.
The Department of Trade and Industry is considering a wide range of further potential licensees for private and public telephone services. Applicants include subsidiaries of British Rail and British Waterways as well as foreign communications companies.
Recently the Government appointed Donald Cruickshank, a former managing director of Virgin, as the new director general of Oftel. He is not expected to change radically the watchdog's approach to regulation.
Among his first tasks, Mr Cruickshank will have to tackle the contentious issue of imposing accounting separation on BT.
This is considered vital in securing fair agreements for other telecommunications firms who need to connect into BT's network.
Touche Ross has prepared a report on how accounting separation might be achieved. If BT and the regulator fail to agree on the issue, the matter would be referred to the Monopolies and Mergers Commission.