City: BT calls the shots

THE transformation of BT - once one of the most hated institutions in the land - into a properly managed modern telephone company continues apace. Last week's round of price cuts, deliberately aimed at the residential customer and marketed in a way that caught the headlines, was further evidence of it.

Time was when BT regularly summoned journalists like me to brief them on the need to rebalance tariffs in a way that piled on the agony for low-use residential customers but eased the burden for high-volume business users.

People who didn't use the telephone very much were being subsidised by those who used it a lot, BT would argue; the company should therefore be allowed to increase the residential rental charge so as to correct the balance. The argument was, of course, always so much accounting mumbo- jumbo and monopolistic claptrap, though it was occasionally argued in a quite eloquent and convincing manner. Fortunately, Oftel, the industry watchdog, never had much time for it.

BT faced little or no competition for ordinary domestic customers, but lucrative business subscribers were being cherry-picked by Mercury Communications. In truth, what BT was doing by making the case for aggressive rebalancing was trying it on; it wanted to exploit its monopoly in local networks to compete more effectively in services where it did face a challenge - long distance and international.

You don't hear much talk of rebalancing these days. Monopolistic practices die hard, but slowly BT has woken up to the fact that ordinary residential telephone subscribers - 20 million of us - are its lifeblood, a huge and hardly tapped market that for years has been largely taken for granted.

What's brought about this change? In part it is regulatory necessity. BT was almost bound to share price reductions this year between residential and business users, so onerous is the present RPI minus 7.5 price-cap regime. Competition is also beginning to bite at the local as well as the long-distance level, with a growing threat from cable, mobile and Mercury.

But perhaps most important, there's been a sea change in attitudes at BT. To most of us, it might seem blindingly obvious that if you put the customer first, that if you try to persuade him to use the telephone a little bit more through clever marketing, good value and decent service, then you don't need to abuse your monopoly to keep the profits flowing; they'll come naturally.

After 10 years on the defensive, of being repeatedly thumped over the head in the press and by the regulators, BT seems to be moving on to the front foot and gaining the initiative. It's only a shame it's taken so long for the company to get there.