BT fails in attempt to have residential market price controls lifted

British Telecom yesterday lost its attempt to have price controls lifted in its residential market and the industry regulator proposed tougher controls on its charges to other operators for using its network.

British Telecom yesterday lost its attempt to have price controls lifted in its residential market and the industry regulator proposed tougher controls on its charges to other operators for using its network.

Oftel, the telecoms regulator, wants to extend the price caps, which were due to end next July, until July 2002. The controls require BT's charges to domestic customers, to fall 4.5 per cent in real terms each year. The regulator estimates this proposal, set out in a consultation document yesterday, will save BT's customers £270m.

However, analysts said that, despite the tough talk from Oftel, the review was less harsh than feared. BT shares yesterday closed up 45.5p at 783p.

Oftel also said that it wanted to reduce the interconnection charges that BT makes to other operators, such as WorldCom and Colt Telecom, to runs calls over its network, in order to bolster competition.

The regulator said the cap on BT's interconnection services could be toughened to enforce a yearly decline of up to 11.5 per cent in real terms when existing price controls expire in September 2001.

The current regime requires BT's interconnection charges to fall by 8 per cent in real terms each year. The tougher price controls will be enforced until 2005 under Oftel's proposal.

"BT has argued that price controls should be removed because of the extent of retail competition. Oftel does not believe that this can be justified at this time," Oftel's director-general, David Edmonds, said yesterday. BT yesterday said it was disappointed by the review. "We think feel there is a great deal of competition right across the UK telecoms market and believe price controls should reviewed or removed right now," a spokesman said.

Oftel also warned more stringent measures would be introduced if it did not see more competition after the introduction of carrier pre-selection in January, which allows callers to use different carriers without dialling more numbers.

Oftel's final review will be published in January.