The market decided that the UK Office of Telecommunications had got the new regulatory regime for British Telecommunications Plc about right, and marked what had been very depressed British Telecom shares up accordingly. They jumped 16 pence to 371.5 pence after it was pointed out that the new controls would apply to only about a quarter of annual revenue. The new regime proposed by Oftel yesterday removes price controls for big business altogether on grounds that the pursuit of their custom has created a super-competitive environment already. And where a figure of at least five percentage points below inflation had been mooted, Oftel finally set a cap of the rate of inflation minus four and a half percentage points – down from inflation minus seven and a half – as the maximum prices may rise each year for the four years after 1997. Thereafter, Oftel hopes to be able to abandon price caps altogether. British Telecom looks likely to accept the new pricing regime, but is much less happy at Director General of Telecommunications Don Cruickshank’s insistence that the looser price controls be tied to new measures to stamp out alleged anti-competitive behavior by British Telecom and others in the industry, in which he would be judge and jury with no appeals procedure. British Telecom has to accept the whole package or have have the issue reviewed by the Monopolies & Mergers Commission – and run the risk of having a tighter price cap imposed. British Telecom hopes to find legal grounds for a challenge that the two matters should be treated separately. Mercury Communications Ltd welcomed the proposals, saying that they would lead to lower bills for residential customers and allow competition to continue to develop. Nynex CableComms Group Plc also said it was broadly positive about the price review, and saw it as a significant improvement on the original Oftel proposals; it also liked an end to all controls in 2001.
