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January 28, 1988

OFTEL TO IMPOSE PRICE CRIMP ON TELECOM

By CBR Staff Writer

Director general of the UK Office of Telecommunications Bryan Carsberg yesterday said that he intends to impose formal price control on British Telecom’s inland private circuits, following Telecom’s announcement that rentals for private leased circuits will rise from March 1 by an average of 50% for analogue circuits, AccessLines and Kilostream lines. Rentals will rise by an average 5% in general, but there will be no increase for Megastream or Frequency Division Multiplexed circuits. Carsberg said that now that Telecom’s prices are close to being in balance with its costs he will seek to agree arrangements for price control, either as part of the RPI-3 price control basket, which is due to expire in 1989 and keeps Telecom’s annual prices for UK call charges and line rentals to three percentage points below the change in the retail price index, or by establishing a separate price control for private circuits. He said also that Telecom’s costs have risen sharply because the company has changed its accounting methods by allocating more costs to support staff. But when Telecom last raised its prices in November 1986, Carsberg said that given that it has a reasonable rate of return on capital no case existed for tariff increases after that date. Carsberg said he will not respond to yesterday’s price increases as a separate item, but as part of a large scale review of the RPI-3 formula. Telecom maintains that it will be the cheapest PTT in Europe and North America even after the March increases.

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