Despite these apparent successes, what is striking about the UK experience is the time which other operators have taken to establish themselves in the market and threaten BT's market dominance. Evidence presented above suggests that, throughout the period of the duopoly policy, Mercury maintained a constant differential between its and BT's prices, rather than making an all out onslaught upon BT's market share, in the manner subsequently displayed by entrants in Australia, New Zealand, and elsewhere. As a result, BT still retains market shares in excess of 90% in access, local calls and national calls. Even in international calls, its market share at present is probably about 70%.

This dominance may now come under much greater threat as a result of the liberalisation of the market in 1991. Although the cable companies have been quick into local markets, other operators have taken more time to roll out their networks and offer service. In the case of AT&T, a major potential entrant, the licensing procedure was delayed by international regulatory considerations.

Thus four years after the formal abandonment of the duopoly policy, the UK telecommunications sector is now experiencing much more substantial competition. It is imposing considerable pressures on the regulatory regime, particularly in the areas of interconnection policies and the definition of anti-competitive practices. In the interim, more competition is associated with more rather than less regulation. Consideration is, however, now being given to ways of making regulation less intrusive and future developments are likely to take this route.

The current review of interconnection arrangements described in Section 1.5 above has broadened into a more general search for looser forms of regulation. The fastest practicable timetable for such changes would be for the results of the interconnection review, notably switching to an incremental cost basis for interconnection charges and abandonment of the constraint on BT's rental charges to be introduced in 1996. It would then be possible, in the course of the review of BT's price cap from 1997, to consider whether to abandon the retail cap in favour of a wholesale price cap covering BT's network services. If this policy were adopted, then as competitors built infrastructure, network services subject to competition could progressively be freed from the price control regime. Although the dates of these changes are uncertain, it is likely that future developments will take this course.

Finally, it is appropriate to review the course of regulatory policy since 1984. The two cornerstones of this policy have been the arrangements for interconnection and BT's RPI-X price cap. The intricacies of interconnection have been extensively rehearsed above. It is, however, appropriate to conclude with some general remarks about the effects of the price cap system.

Examination of the record shows that not only has the price cap been progressively tightened, but also BT's retail prices have generally been constrained by it - in the sense that, with very few exceptions, the company has priced up to the cap. Throughout the period, too, OFTEL has insisted on allowing the price cap to run its full four or five-year course. (Note that the