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BT rapped by regulator
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July 3, 2000: 9:30 a.m. ET
Oftel says mobile arm's 'unfair' cross-subsidies harm competition
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LONDON (CNNfn) - BT Cellnet, Britain's No. 2 mobile-phone operator, was told Monday by the U.K. telecom industry regulator to end cross-subsidies that allow its consumer business to run at a loss, hampering independent operators' ability to compete.
The government-run Office of Telecommunications (Oftel) said the prices that BT Cellnet charges consumers do not cover the expense of providing the network services, while independents using the Cellnet network had to pass on the full network charge to customers.
BT Cellnet quickly rejected the charge.
Oftel requires that independent mobile operators be allowed to use Cellnet's network and that of market leader Vodafone AirTouch PLC (VOD), because of their strong market positions.
Independents can buy airtime capacity at wholesale prices from the two leading networks and then resell it under their own brands. A complaint from independent cellphone operator Talkland triggered Oftel's investigation.
However, an Oftel probe launched last year found that Cellnet, a wholly-owned unit of British Telecommunications PLC, had used its network business to subsidize its three wholly-owned consumer units, BT Mobile, Lumina and Call Connections.
"If BT Cellnet charge service providers too much for wholesale airtime, customers will face an unbalanced choice when shopping around for a good deal on their mobile phones," Oftel Director General David Edmonds said in a statement.
Oftel suggested that cutting the wholesale rates charged to third-party operators could solve its competition concerns.
The regulator issued a draft directive Monday calling on Cellnet to end unfair cross-subsidies and said it would review the market again in the autumn.
However, BT Cellnet rejected the Oftel charge, claiming that the formula used by Oftel to assess the costs of network use was outdated and inaccurate. It also called on Britain's two other network operators, One2One and Orange, to be required to open their networks at wholesale prices.
BT (BT-A) shares moved 1.6 percent higher by mid-afternoon Monday. 
-- from staff and wire reports
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BT Cellnet
Oftel
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