Dial AT&T for competition

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At first sight, this week's award to AT&T of a licence to operate telephone services in Britain may hardly seem head- line news. America's largest long-distance phone company owns no infrastructure in Britain, and seems to have no clear idea of whether it wishes to enter the business or the home market.

Yet the granting of the licence may be worth a second glance. AT&T is a vast company honed by competition in the US. It is skilled at the marketing techniques needed to persuade the public to make the transition between the devil they know and the devil they do not. And it has the financial strength either to purchase an existing infrastructure, such as Energis or Mercury, or to build lines of its own.

Had its licence been granted five years ago, it would have had little effect on the average subscriber. Until recently, any newcomer has had to pay BT to make that vital connection between the exchange and the home, because of the prohibitive cost of laying cables under the roads - and as a result, customers have still looked to BT for the essential services of line installation and repair. The telephone service seemed a natural monopoly.

But new technology has made the timing of AT&T's arrival more auspicious. The expanding cable television network offers a new route for phone companies into British homes. Alternatively, they can bypass underground cables completely and use new technology such as microwave radio to reach their customers at an even lower cost.

BT should take the opportunity of the US company's entry to try and bring its services up to the standards consumers require. No longer will it be able to content itself with the fact that 25.5 million customers are reliant on it to provide a telecommunications service. Yet the granting of the licence ought also to provoke new thinking at Oftel, the industry regulator. The rationale for forcing BT to subsidise line rentals with profits from long-distance calls used to be that the telephone service was anatural monopoly - that consumers had nowhere else to turn when they wanted a phone installed. That is now manifestly not the case.

It will soon be time for Oftel to step back from individual pricing decisions, and to content itself with the broad framework of BT's overall tariff of prices. If Oftel can succeed in fostering real competition locally as well as long distance, then Bri t ish consumers may join their counterparts in America in benefiting from the cheapest and most efficient telephone service in the world.