The UK Office of Telecommunications watchdog yesterday launched its a consultation paper proposing changes to current sector regulations such as the amount dominant carrier British Telecommunications Plc can charge for phone exchange lines. Oftel said its long term aim is to move towards a framework of minimal regulation and market determined prices. The paper said the current price control on call tariff growth of 7.5% below the Retail Prices Index would remain until its expiry date in 1997. Oftel’s preferred option, however, is to remove the RPI+2% constraint on how quickly British Telecom can increase exchange line rental charges, allowing the existing ADC regime of determining interconnection fees between British Telecom and other operators to be abolished. ADCs are the payments British Telecom rivals such as Cable & Wireless Plc’s Mercury have to make to British Telecom to compensate it for the additional costs associated with being the main national network operator.
Broadly welcomed
But Oftel said it would only support removing rental constraints if the domestic customer is fully protected. Competition and the existing call tariff caps meant the removal of the line rental constraint should not lead to rises in real terms in telephone bills for residential customers, it added. It said any rises in overall phone bills could be offset by adjustments to the present Light User scheme aimed at infrequent phone users. It also re-emphasised its support for the universal service obligation requiring the main operator to provide everybody in the country with a phone line. Other points covered by the paper include setting the notional cost of British Telecom’s universal service obligation at between UKP90m and UKP160m. Analysts said the universal service obligation cost was currently around UKP400m. The paper also proposes calculating British Telecom’s charges to rival carriers as a function of how much they use its network; brings up whether competitors should be given help, such as partial waivers on interconnect charges, in the new regime; and whether there are alternatives to calculating interconnect charges on the current per-minute basis. It said the consultation period would last until March 31 1995. Any change related to the RPI-7.5% formula would have to wait until its expiry in 1997, but analysts said other changes could start to be implemented from the end of 1995. Analysts told Reuter Oftel’s consultation paper favours rivals over former monopoly carrier British Telecommunications Plc because of the potential abolition of the ADC payments to British Telecom. On the other hand, lifting the constraints on line rental fee growth would provide it with additional revenue, which could offset the loss of ADC payments. British Telecom would also be free to compete more with carriers like Cable & Wireless Plc’s Mercury in the long distance market. British Telecom broadly welcomed the document and interpreted one possible option in the suggestions as opening the way to the complete removal of retail price restrictions, although this is not the preferred route of Oftel itself. Oftel expects to make an announcement next summer after the consultation process closes at the end of March 1995 and changes that do not relate to the RPI-7.5% restriction could be implemented as early as autumn next year.
