presents information on market shares. Discussion is initially confined to fixed services; outcomes in the mobile market are described in Section 2.5 below.

Table 2.1 lists licensed operators providing local, long distance and international services in early 1995. (Note that some of these firms are licensed to provide more services than they currently supply; in addition, many licensees have not yet started operation.)

Until recently, market share data have been sparse. For the 1980s a number of estimates are available. Some of these are reported in Table 2.2. At the start of 1995, however, OFTEL (1995a) began publication of market information on the UK telecommunications industry. The document includes data on exchange lines, call revenues, and call minutes. The first two years covered are 1992/93 and 1993/94.

In order to preserve confidentiality, data on some operators' market shares are either not published, or aggregated in an "others" category. Table 2.3 shows market shares in 1992/93 and 1993/94 in exchange lines and various categories of calls.

The Tables show the limited inroads made into the market by Mercury for the duration of the duopoly policy. Since 1991, Mercury's market share has grown, especially in international calls where it now accounts for 24% of retail call revenues (and 28% of call minutes).

In the exchange lines market, the principal recent development has been the rapid expansion of the number of lines provided by the cable operators. Table 2.4 shows that cable operators now account for approximately 1½% of exchange lines. What is striking, however, is the speed with which cable operators' market share is growing - doubling approximately every nine months. To date, however, BT remains dominant in the market as a whole, accounting for 97% of exchange lines in 1994 and 87% of call revenues.

### 2.2 Pricing

As noted above, BT's prices have been controlled since 1984 by a succession of price caps. Table 2.5 shows the resulting changes in the real prices of the principal services over the period since privatisation in 1984; and Table 2.6 shows year on year changes. In aggregate, these price changes have followed successive price caps.

Inspection of Table 2.5 shows that BT has achieved a significant element of rebalancing over the period. The weighted average real cost of all services has declined by about 40%. Quarterly rentals have increased slightly, while call prices have declined substantially. Within calls, local call charges have declined the least and long distance and international calls the most. Peak rate call prices have declined more sharply than non-peak charges. Not surprisingly, these changes reflect the differing intensity of the competition BT has faced in its various markets. Until recently, it has faced very little competition in local markets, but substantial competition in international markets and in the peak rate market for national calls.

The impact of price changes on the residential market is better illustrated by data on the telephone bill of a “typical” residential customer, published by OFTEL since 1988. Table 2.7 shows the development of the median residential bill since that date. In real terms, prices of the