View from City Road: Ringing in the changes, slowly

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Next November, Oftel, the telecommunications watchdog, is due to release a catch-all consultative paper being billed as its most important regulatory initiative since the duopoly review three years ago. Among other things, it will address the controversial issue of whether BT's obligation to provide a universal service at a price that is the same for all should be maintained.

Don Cruickshank, director-general of Oftel, has so far played his cards close to his chest but some of his thinking is beginning to become a little clearer. The issue of universal pricing falls into two distinct categories; whether BT should be allowed to charge different prices according to geographical location, and whether it should be allowed to offer subscribers a range of different pricing packages to choose from.

The first category is perhaps the easier to address. Without much tougher safeguards to prevent predatory pricing, which at present do not exist in either competition or telecommunications law, it would plainly be unacceptable. Without such safeguards BT would be able to cross- subsidise from geographical areas where its monopoly is maintained into other areas where it is not. In any case, technological advances mean that the cost of servicing outlying regions is now little different from traditionally low-cost areas. Once the line is installed, the cost of transporting a call is about the same from Land's End as it is from the City.

As things stand, BT should therefore be given short shrift on regional differentials. But what about other forms of differential prices? Here the arguments in favour of BT's point of view are much stronger. To some extent it is already allowed. Discounts to bulk users are on offer. The question is, should BT be allowed to go further and at what speed? Cable and mobile companies can make whatever offers they like on pricing and it is in any case plainly to the customer's advantage that he should have a menu of pricing packages to choose from. Too fast a move to deregulation of prices, however, would nip nascent competition in the bud.