Oftel, the British government-appointed telecoms watchdog has ordered British Telecommunications Plc to cut its interconnection charges by up to 28%. Commenting on the new set of guidelines that attempt to stimulate competition in the UK telecoms market, Don Cruickshank, director general of telecommunications, said the new guidelines which set out charges for the next four years, meant charges would drop by around 28% in real terms over the period. The new arrangements, due to come into effect on October 1, scale back regulation in areas where operators have enough choice to allow competition to set prices. Under the new guidelines, where there were as yet insufficient alternatives to using BT’s network – as with call termination – average charges are to be subject to charge caps and will be required to fall by 8% below the rate of inflation. Where services are likely to become competitive by 2001, Oftel has suggested just a safeguard cap so that charges cannot increase in real terms. In addition, there will be no direct control over charges for services where network operators have a choice of suppliers. The use of charge caps at the wholesale level is a new approach. It is much less interventionist than the current system under which Oftel determines the exact price for interconnection services. The aim is to ensure that the sort of efficiency improvements that would be expected in a competitive market will be reflected in network charges. Cable and Wireless Communications Plc, Britain’s second largest telecoms operator, welcomed Oftel plans as excellent news. BT, which emphasizes that UK interconnect charges are already around one third of those in other countries, said the planned price limits were tough and a little unjustified. BT says it will study the proposals and make its formal response to Oftel on August 22. Final Oftel proposals will be considered by BT’s board in September.