Oftel chief rules out break-up of BT: Cruickshank demands that prices charged to rivals using network are divulged

DON CRUICKSHANK, the newly appointed telecommunications regulator, has ruled out the break-up of British Telecommunications.

However Mr Cruickshank, who became director-general of Oftel in April, has proposed far-reaching changes to promote more competition for BT, which still has 90 per cent of the telecommunications market in Britain.

Oftel said BT should publish the prices it charges other operators to use its wires, instead of negotiating in secret. Once these were published, Oftel would retain the right to change prices if other companies claimed they were unfair.

The proposals will be welcomed by rivals, including Mercury and cable television companies, as well as potential newcomers to the market, which include the electricity companies and AT&T of the US.

Mr Cruickshank also plans to force BT to publish separate accounts for different parts of its business - a move that will be strongly resisted by BT. Its rivals would then know what each part of BT's operations cost to operate and could judge whether its charges to them for using the network were justified.

Mr Cruickshank said that for accounting purposes, BT should be split into BT-Network and BT-Retail - the arm that sells services to the end- user. BT-Retail would have to pay the same as rival telephone companies to use the BT wires.

The accounting separation is expected by the end of this financial year, a timetable which BT said yesterday was far too demanding.

The watchdog is calling for additional powers to allow it to decide how BT should allocate its costs. If BT and Oftel cannot agree on these changes, the company will be referred to the Monopolies and Mergers Commission.

The proposals, which form Mr Cruickshank's first statement on the industry, come weeks before the planned pounds 5bn share of the Government's remaining stake in BT. He wants responses to his document by 16 July, which will coincide with the share sale. He said the prospectus for the sale would include a substantial chapter on regulatory issues.

Mr Cruickshank indicated that he would take a tough approach to regulation. 'I have found a regulatory environment which, in my view, is slightly short of that which is needed to provide competition.'

He said he would not interfere with tough new price controls which take effect in August and last for four years. But competitors needed much more information about BT's operations and greater help to break into the market if competition was to succeed.

'My first view is that BT protests too much. My reservations - about the regulatory environment we have in place and whether the information available is sufficient to give competitors the confidence they need to invest - are based on public statements by Mr Iain Vallance (BT's chairman) and meeting with him.

'There are some dated assumptions, I suspect, about the cost of operating BT's network. The point of all this is to flush them out so that Oftel and others know more,' he added.

BT believes the Oftel proposals are far too complex. It said basing charges for interconnection on costs was impossible as BT's prices for the end- user were capped and did not reflect costs.

The group fears it may end up subsidising other operators that use its wires and it strongly resents Oftel's desire to extend its powers to decide how BT should allocate costs.

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