Skip navigation | Accessibility and accesskey details | Sitemap

National Audit Office Press Notice

The Office of Telecommunications: Countering Anti-competitive Behaviour in the Telecommunications Industry

Report by the Comptroller and Auditor General
HC 667 1997/98
8 April 1998
ISBN: 0102937982
Price: £10.75

Sir John Bourn, head of the National Audit Office, told Parliament today that telecommunications companies now have greater confidence in the fairness of competition in their industry. The Office of Telecommunications (OFTEL) have improved considerably the way they counter anti-competitive behaviour in the industry so that competition can be developed and maintained but there is scope for them to improve their effectiveness still further.

OFTEL's key objective is to provide the best possible deal for consumers in terms of quality, choice and value for money and they consider that the most effective way of achieving this is not through rigid price regulation but by encouraging competition. Where a company has a large share of a market there is a risk that it may act anti-competitively by, for example, unfairly lowering its prices for a period of time with the intention of driving competitors out of that market. If such behaviour went unchecked and competition was stifled, consumers would be exposed to higher charges, a lower quality of service and less choice.

The National Audit Office found that:

• most telecommunications companies licensed to operate national and local networks claimed to have experienced some form of anti-competitive behaviour;
• two-thirds of the companies operating in the industry said that OFTEL's performance in countering anti-competitive behaviour had improved between 1996 and 1997;
• between 1995 and 1997 OFTEL opened and completed 217 investigations into particular practices which were allegedly having an anti-competitive effect on the market;
• in 53 per cent of cases OFTEL concluded that there had been no breach of the operator's licence nor was it a matter to be dealt with under general competition law;
• in 37 per cent of cases, as a result of OFTEL's investigation, the parties reached agreement between themselves or the operator stopped the alleged anti-competitive behaviour;
• given BT's considerable market power it is not surprising that 84 per cent of investigations arose from complaints about them;
• OFTEL now act more quickly and report their performance against published targets;
• OFTEL have taken a number of steps to address the problem of staff turnover which had resulted in the regular loss of skilled and knowledgeable people;
• the industry have a high regard for OFTEL's legal and technical expertise but are less positive about their commercial awareness; and
• although licensed telecommunications companies are generally very positive about OFTEL's performance, other groups in the industry, with whom OFTEL have less routine contact on competition issues, are less positive.

OFTEL have indicated that they accept our recommendations that they should:

• continue to examine ways in which they might recruit and retain for longer periods staff with skills which are relevant to their work on anti-competitive behaviour;
• consider using an external system of review to assess from time to time how the quality of their investigation work is developing;
• supplement their existing performance measures by reporting the time taken to complete an investigation into anti-competitive behaviour from the date the complaint was received and the average time taken to handle all complaints of anti-competitive behaviour; and
• review their experience of using the fair trading condition, which was introduced into the operating licences of telecommunications companies to give OFTEL a more effective deterrent against anti-competitive behaviour, in preparing themselves for the new powers they will have if the Competition Bill is enacted.

Notes for Editors

The Comptroller and Auditor General, Sir John Bourn, is the head of the National Audit Office employing some 750 staff. He and the NAO are totally independent of Government. He certifies the accounts of all Government departments and a wide range of other public sector bodies; and he has statutory authority to report to Parliament on the economy, efficiency and effectiveness with which departments and other bodies have used their resources.

Press Notice 33/98
All enquiries to NAO Press Office:
Tel: + 44 (0) 20 7798 7400