BT may take charges dispute to MMC

British Telecom warned yesterday that it may go to the Monopolies and Mergers Commission (MMC) to resolve a dispute with its regulator, Oftel, over the amount it can charge competitors for access to the BT network.

Don Cruickshank, the director general of Telecommunications is proposing that the interconnection charges, which earn BT pounds 300m a year in revenue, should be cut by 10-20 per cent from October and subject to a price cap of RPI minus 6-12 per cent for the following three years.

BT said it welcomed the proposal to bring all network charges into one framework with an overall price cap but said it had "major concerns" over the level of charges proposed by the regulator. Mr Cruickshank is due to publish his final proposals in the middle of next month.

Ian Morfett, BT's director of strategy and business management, said: "If Oftel comes out at the extreme end of the range, it is an issue that is important enough for us to consider going to the MMC."

BT believes there is no case for any one-off cut in interconnection charges and says future increases should be in the range of RPI minus 3-6 per cent.

Although the charging regime will apply also to BT's competitors such as Cable & Wireless Communications, Energis and other cable companies, BT will be most affected because the bulk of interconnections are made on to its network. The interconnection charge makes up about a quarter of the cost of telephone call routed from one network to another.

Mr Morfett said that the charging formula as proposed by Mr Cruickshank would reduce profits in the first year by at least pounds 30m but the figure could be as high as pounds 40m depending on how much it was tightened. This compares with the pounds 1.7bn that BT invests each year in its network.

BT said that if the connection charges were set too high it would deter investment in the network by all telecom operators because they would not be able to earn an adequate rate of return. "This is not a black and white issue, nor is it BT versus the rest," said Mr Morfett. "We will be interested to hear what C&W and the rest have to say because ridiculously low interconnection charges would not be any good for them any more than they would for us."

BT submitted its initial response to Oftel earlier this week and has until September to respond to Mr Cruickshank's final proposals. The decision on whether or not to go to the MMC would be made at a BT board meeting in September.