Dropping the burden

BT wants to stop paying for the upkeep of its phone boxes, but its solution doesn't ring true for rivals. Clayton Hirst listens in

BT, fresh from reporting annual profits of £1.8bn, has asked the regulator to set up an industry fund to pay for some of its unprofitable services.

The proposal, contained in a 25-page letter to Oftel, argues that the time has come for rival operators to foot the bill for the upkeep of services such as public payphones. When BT was privatised in 1984, the Government placed a so-called Universal Service Obligation (USO) on the company to ensure that every citizen had access to telecoms.

As well as phone boxes the USO ensures that households have access to a telephone line and requires BT to offer special tariffs for people with special needs. Oftel is now considering expanding the USO to include basic internet standards.

In its letter, BT says that because there are more than 250 companies offering telecoms services in the UK then, "BT should not be left in a position where it increasingly loses profitable market share ... and increasingly left with a USO rump." The letter supports the idea of a USO. But adds: "The USO represents a significant net cost on BT, which should be funded by the industry." In particular, BT urges Oftel to create a dedicated fund, "with the sole purpose of funding the significant costs of the payphone USO".

It is understood that BT plans to take up the issue with the new media regulator, Ofcom, when it begins life in December. BT doesn't disclose how much the USO costs, but analysts estimate it could be between £30m and £100m a year.

BT's idea has angered some rivals. Ian El-Mokadem, managing director of Centrica's telecoms arm, said: "If we were competing with BT on a level paying field then we would have no objection in picking up the social costs of being in the business. But we are not able to access BT's network on a level base. BT is at a massive cost advantage."

Bill Allan, chief executive of Thus, said that, in principle, setting up a fund to pay for USO services was a good idea. But he added: "For this idea to work we would need to know the true cost of the USO. But it is impossible to tell because of all the cross subsidies within BT. BT would have to open its books in a way it has never done before."