BT plays down rift over access

British Telecom yesterday played down indications of a further rift with its US partner, MCI, after the US telecommunications watchdog confirmed that the American carrier had supported controversial proposals to change the way British consumers gain access to competing phone networks.

In a letter to the Federal Communications Commission (FCC) this week, MCI conceded that its preferred route to greater competition was through "equal access" for consumers to different networks. The letter prompted a favourable statement by Reed Hundt, the FCC chairman, suggesting the watchdog should now approve BT's pounds 13bn proposed merger with MCI.

The deal has been thrown into doubt following the shock profits warning three weeks ago from MCI. Institutional investors have told BT to renegotiate the deal and a team of top BT executives, led by Sir Peter Bonfield, is in the US examining MCI's prospects. But the MCI camp maintains that BT has no scope to renegotiate the terms of the deal under the merger agreement.

Equal access, which enables consumers to "pre-select" a chosen long-distance operator, was used to bring competition into the US market in the 1980s. The UK regulator chose a different principle, known as "indirect access", where consumers have to dial a special code to access other operators from BT's local network. MCI's rivals, including AT&T, have pressed the FCC to demand equal access as a condition for approving the merger.

Mr Hundt said MCI had conceded that the FCC could take sanctions against BT, such as blocking incoming calls to the US, if it failed to comply with proposed European rules on phone competition. In a draft directive the EC has called for equal access across the EU by 2000.

The MCI letter said the company believed "that equal access policies in general are a pro-competition, pro-consumer step toward ensuring that telecommunications markets are fully open". However, it added that in the UK policymakers could argue that changing the rules six years after competition began would be "unfair" to companies which had invested in building local networks.

Diane Cornell, head of the FCC's telecommunications division, said Mr Hundt's comments were "based on the concept that the UK would not get an opt-out from the equal access directive from the European Commission". She added: "In other words there would not be flexibility for the UK not to adopt equal access."