Although the UK Office of Telecommunications lifted the cap on line rental charges that British Telecommunications Plc is allowed to impose, it savaged the company in its latest policy statement on competition in the industry (CI No 2,714). In the policy paper, Oftel director general Don Cruickshank promised to introduce a general condition in the company’s licence to deal with anti-competitive behaviour. A general stricture will better equip it to prevent market abuses, whereas the current system, based on a large number of rules written into the licence, makes it possible for British Telecom to find cracks in the system. As for the rest of the document, it contains proposals to scrap Access Deficit Contributions. But there was no change in Oftel’s position on the overall Retail Price Index minus 7.5% price cap on bills, which will remain in place at least until 1997. In effect, this seems to amount to the regulator keeping British Telecom on the hook, leaving it the option of either losing market share or seeing its profits squeezed. Other recommendations include a move towards incremental costs as a basis for charging other operators for use of the British Telecom network and a call for a more positive approach from the company to improving the competitive framework in the UK by, among other things, implementing internal controls on its business. The report also stated that the right to an affordable universal service will not change. Cruickshank said the decision to remove the pricing formula was backed by research showing that customers were now interested in a choice of billing arrangements. However, he warned British Telecom to respond to the change in such a way that no group of customers faces a real increase in their bills, and said that Oftel would set in place guarantees to ensure that infrequent users’ bills would not increase faster than inflation. One crumb of comfort for the telecommunication giant in the report was the observation that the current ban on it using its network for broadcasting was one of the constraints that might depend on its attitude towards competition – implying a possible early review if it frees up the market. The broadcasting ban is set to last until at least 2001, with a possible review in 1998. Commenting on the report, British Telecom said it was concerned at statements on anti-competitive behaviour, warning that the regulator will become the prosecutor and judge in anti-competition cases, and called for an appeal system separate from Oftel. The company added it was a bit surprised at the timing of the abolition of the line rental charge within the period of the Retail Price Index minus 7.5 points formula. For its part, Mercury Communications Ltd welcomed the proposals, saying they were the first step on a critical journey towards the end of detailed regulation. The news is also presumably good for cable television firms, which can follow suit with any rises in line rental charges, but can take the extra revenue as pure profit.
