Oftel forced to tone down attack on Blair's internet deal with BT

JOHN RENTOUL

Political Correspondent

Tony Blair's eye-catching deal with BT to cable up schools, hospitals and libraries to the information superhighway for free was attacked by the telecom regulator yesterday for increasing the company's monopoly power.

However, Don Cruickshank, director general of Oftel, was forced to withdraw part of his attack, after Labour responded furiously, insisting it would not give BT special rights.

Mr Cruickshank claimed in a BBC radio interview on Wednesday night that the Labour-BT deal promoted monopoly and said: "I think schools should have a choice. They should not be obliged to hook up to BT."

But within hours he was forced to issue a clarification, after Labour insisted it did not want to give BT exclusive rights.

In his Brighton conference speech last month Mr Blair, the Labour leader, announced that he had agreed to allow BT to sell broadcast services - TV channels and computer data - on its network from 2002 in return for social benefits.

A spokesman for Mr Blair said it was "totally absurd" to suggest that Labour was trying to give BT monopoly rights. "It would be open to cable companies to bid to link up schools and hospitals as well," he said. Labour wanted "more competition in the market" and it was the Government which was preventing it, he said.

Margaret Beckett, Labour's spokeswoman for trade and industry, said she was surprised by Mr Cruickshank's comments. "What Labour is doing is promoting competition by lifting the prohibition to allow BT into the market for cable companies."

Mr Cruickshank was on holiday at the time of Mr Blair's conference speech, and was not consulted, but a briefing note issued by the Labour Party with the text of the speech says nothing about restricting access to BT. It makes it clear that the party planned "to require BT, the cable companies and others" to ensure that "the whole country is linked to the new networks".

The cable companies are already offering schools free access to their networks, and they were disappointed by the hype attached to BT's "self- interested" offer. However, a spokesman for the cable companies association yesterday said "relations with the Labour Party are very good".

But Mr Cruickshank stood part of his ground yesterday, saying cabling schools and hospitals was a social issue which should not be tied up with the competition issue - the question of when BT should be allowed to sell TV services on its network. The Government has banned the giant privatised company from doing so until at least 2002 in order to protect the cable companies from BT's market power while they establish themselves in the market.

Ian Taylor, technology minister, said: "Effectively Blair is allowing BT into the broadcast market without the precondition of competition which we have applied."

But Graham Allen, a Labour frontbencher involved in the negotiations with both BT and the cable companies, said: "Currently we have a cable monopoly. The last thing we want to do is substitute a BT monopoly for a cable monopoly."

The cable companies claim to have already invested pounds 5bn in creating a national network, capable of carrying high-capacity data and TV channels.

The BT deal, what they said

Tony Blair, speech to Labour conference, Brighton, 3 October: "In return for access to the market, I can announce BT has agreed, as they build up their network, to connect up every school, every college, every hospital and every library in Britain. For free."

Sir Iain Vallance, BT chairman, 3 October: "We strongly believe we can make a tremendous contribution to improving the delivery of public services and in particular health and education."

BT spokesman, 3 October: "It's not a deal, it's more of a concept."

Ian Lang, President of the Board of Trade, 5 October: "If there is a deal, it cannot be seen to be in the public interest. Competition and choice best serve the consumer, not private, sweetheart deals with one company that undermine the others."

Lord Tebbit, BT director and former Tory Cabinet minister, 5 October: "On this occasion Mr Blair is proposing to do something which I think is correct and in the interests of the country as a whole, not just of BT."

Don Cruickshank, Oftel director general, 1 November: "I am against the monopolistic element, certainly [of the Labour-BT deal]. I think schools should have a choice. They should not be obliged to hook up to BT."

Tony Blair's spokesman, 1 November: "It would be open to cable companies to bid to link up schools and hospitals as well. Labour wants more competition in the market."

Don Cruickshank, 2 November: Oftel "will have nothing to do with monopolistic or exclusive supply by BT, and I am glad that the Labour Party agrees with this."

Ian Taylor, technology minister, 2 November: "If I as a minister had done a deal as bad as Tony Blair did with BT, I'd be sacked on the spot.