Perspective: Why BT should not be given a 'license to steal'
By Michael Potter, Communications Week International,
21 February 2000
As of 1 January 2000, British telephone consumers are spending more on their
phone calls than they should be paying, if the Office of Telecommunications
and BT had complied with the original timetables established under European
law. The European Commission passed legislation requiring Europe's former
monopoly phone companies to open their networks in an equal fashion to new
competing telephone companies by the first of the year.
Currently, when dialing zero at the beginning of a call, the vast majority of
U.K. residential customers are automatically routed to BT. If the customer
wishes to take advantage of the lower call charges offered by one of the many
new phone companies, they are generally forced to dial a four-digit prefix.
Because the extra four digits make it less convenient to use an alternative
carrier, the existing system preserves an important competitive advantage for
BT, enabling BT to maintain artificially higher prices.
It's a case of gamekeeper turned poacher - Oftel knew that if the EC did not
allow the U.K. government to defer its obligation to procure BT's compliance,
the government could become liable to consumers for the billions of pounds of
lost savings in lower call charges.
In the holiday quiet of the last few days of December 1999 the EC brokered a
compromise that gave the U.K. government permission to delay the
implementation of the original legal deadlines by three months. The
Commission granted this delay based on a commitment from the U.K. government
to implement, by 1 April 2000, a temporary solution using automatic dialers
that would at least reduce damages to consumers and new entrant phone
The U.K. government spent tremendous resources to legally expropriate
("license to steal") value from consumers. Truly a stealth telecommunications
tax. However this "legal" route is really one of the most subversive of all
If consumers are being ripped off by their phone companies or their
regulators at least they can seek legal remedies to recover damages. In the
case of a legal expropriation it would be nearly impossible for U.K.
consumers to be compensated. Ironically, if you are a consumer, you may be
better off being abused in some of the countries that have traditionally not
implemented nor enforced EU telecommunications laws such as Belgium, Italy or
And, what of Oftel's commitment to the EC to remedy the problem as of 1
April? Current Oftel-BT proposals simply add insult to the consumers'
injuries. Rather than require BT to compensate consumers for damages, U.K.
consumers will be asked to pay most of the cost of installing the
auto-dialers. In other words, they would be forced to foot a large part of
the bill for BT's poor planning and performance.
Let us not allow BT's recent stock crash to provide the company with the
argument that the market needs "regulatory stability," a code word that is
often used as a justification for subsidizing incumbents during
Since there is no realistic solution in sight, the Commission should be
preparing to levy compelling penalties to encourage a more consumer-oriented
outcome, consistent with European law. And Westminster should also have the
chance to accept or reject Oftel's proposals to resolve these issues.
Legislators can either choose to assist BT with its foot dragging, or they
can ensure that BT compensates both consumers and new telecoms entrants for
Michael Potter is former vice chairman of ECTA. He is director of Paradigm
Ventures, a European-focused venture capital firm specializing in
telecommunications and high technology.