BT's discount schemes ruled unfair by Oftel: Watchdog speaks of discrimination against rival telecoms operators

SPECIAL telephone discount schemes offered by BT amount to unfair discrimination against rival telecommunications operators, according to the industry regulator, Oftel.

The finding by the watchdog could mean an end to BT low-cost schemes, which the company regards as an important weapon in fending off Mercury and the cable television companies.

Oftel said that BT's special discounts had been offered at prices which did not cover its costs. This meant the company had been charging itself less for using the network than it charged other companies that need to link into BT's lines.

Don Cruickshank, the newly appointed director-general of Oftel, said: 'Such discriminatory pricing for network usage meant that competing operators incurred higher network costs than BT with inevitable consequences for retail prices.'

Oftel's investigation dealt with BT's Sunday Special at the end of last year, which allowed all UK domestic calls after 3pm on Sunday to be charged at local rates. Mr Cruickshank said that other offers made on a similar basis would also have a significant adverse effect on competition in the telephone service market.

BT has followed the Sunday Special with schemes providing discount calls to Europe, North America and Australia at particular times of day. There are plans in train for more schemes to persuade customers not to migrate away from BT.

Oftel now plans to change the rules to prevent BT discriminating again, although has not said exactly what the changes will be.

The attack from the watchdog coincides with a separate proposal to split BT into different units for accounting purposes which will make it easier for others to see how the company allocates costs.

Oftel hopes that this will help to ascertain what BT should be allowed to charge rival firms that interconnect to the BT network to route calls over the wires.

A spokesman for BT said that it had not decided what action to take but admitted that stopping the schemes could not be ruled out. The company said it was committed to special offers 'as far as they are permitted by the regulatory regime'.

BT has already been told that it can no longer use these low-cost deals to help it stay within the price cap on its basket of basic services.

BT said that when the Sunday Special was dreamt up the issues of accounting separation and interconnection 'had not really begun to be understood'. The company said it was disappointed that Mr Cruickshank, who took office in April, had applied new concepts retrospectively.

Oftel has been consulting widely on accounting separation and is due to publish a report on the issue within weeks.

If BT and Oftel cannot agree on changes to the company's accounting and a new structure for interconnection charges, BT will be referred to the Monopolies and Mergers Commission.

BT has now agreed to publish for the first time a standard set of interconnect charges after consulting with Oftel. But it is strongly opposed to Oftel's intention to maintain powers of intervention should BT's rivals subsequently object to the charge.