BT faces pounds 30m bill under new Oftel deal

OFTEL, the telecommunications watchdog, is expected within days to announce a new interconnection deal between BT and Mercury which is likely to favour the latter.

The deal will establish how much Mercury will pay to use BT wires. It will be backdated to June, 1992, and is expected to result in BT paying Mercury between pounds 20m and pounds 30m. But an industry source said BT could end up paying up to pounds 50m.

Oftel is also seeking a solution to the thorny issue of what to charge BT's rivals to use its network. Don Cruickshank, the director-general of Oftel, said BT should publish the charges for different parts of its network instead of negotiating in secret, as has always been the case. Once these were published, however, Oftel would retain the right to change prices if other companies thought they were unfair.

The terms on which they link into BT's network has become a key issue for emerging operators, including cable television companies, Energis, the subsidiary of the National Grid Company which plans to open a national telephone network next year, and AT&T, the US operator.

As a precursor to publishing interconnection charges, Oftel is forcing BT to publish separate accounts for different parts of its business. The watchdog wants to ensure that the part of BT that sells services to the end-user pays as much as rival telephone companies.

Oftel wants to see these accounts in an initial form by the end of this financial year - a timetable that BT says is far too demanding.

BT has already offered to publish regulated prices for the use of parts of its network where operators have no alternative but to use BT. In the case of long-distance and international calls, however, BT says its prices should be unregulated. Other network operators should also be required to publish charges, it adds.

BT has further expressed concern over Oftel's desire to retain the right to arbitrate on behalf of aggrieved companies, even where the prices have already been agreed with the regulator and published.

The interconnection debate and the new deal with Mercury will highlight BT's frustration at what it regards as onerous regulation at a time of intense competition.

But Mr Cruickshank, who joined Oftel in April, has made it plain that he believes tough regulation is necessary for some time. Should BT fail to agree with Oftel, on interconnection and accounting separation, it could find itself in the hands of the Monopolies and Mergers Commission.

BT says it needs to find pounds 500m extra a year 'just to stand still' because of new price controls on its basket of basic telecommunications services. The controls limit price increases to inflation minus 7.5 percentage points. BT has complained of the difficulty of keeping within a formula that was decided when inflation was significantly higher than it is now.