telecommunications services and equipment.

The task of ensuring that operators comply with their licence conditions falls principally upon the DGT and OFTEL. The DGT is also responsible for proposing modifications to the licences of operators, although the Secretary of State can direct the DGT not to make a licence modification in the interests of national security or international policy. In the event that an operator does not agree to a licence modification proposed by OFTEL, the Director-General can refer the matter to the Monopolies an Mergers Commission (MMC) which reports back to OFTEL. In 1995 the MMC investigated a licence amendment proposed by OFTEL and opposed by BT, concerning the allocation of costs associated with the introduction of number portability.

The DGT also has powers, concurrent with the Office of Fair Trading, to investigate an operator's conduct under the Competition Act, and to make a reference to the MMC under the Fair Trading Act. In 1992, the Competition and Service (Utilities) Act strengthened the powers of the DGT in matters of consumer protection. The DGT may now prescribe and enforce individual and overall standards of performance; establish compensation schemes where service falls below those individual standards; approve operators' procedures for dealing with complaints; and determine specific disputes about individual performance standards. The Act limits these provisions to operators with at least 25% of the voice telephony market in their licensed areas (at present only BT and Kingston Communications).

Finally, operators or other parties may seek judicial review of regulatory decisions. The principal examples of such recourse to the courts relate to interconnection arrangements (see Section 1.5 below). In 1985, BT sought review of a decision relating to OFTEL's capacity to make the initial determination of interconnection arrangements between itself and Mercury. More recently, Mercury has sought a declaratory judgement in the Commercial Court relating to the appropriate interpretation of BT's licence conditions for interconnection. The two plaintiffs in this action, BT and OFTEL, sought to have the action struck out on the grounds that judicial review was the only appropriate way for the Courts to become involved. After hearings in the High Court and the Appeal Court, in January 1995 the House of Lords rejected the application to strike the action out and the case can now proceed.

The regulatory arrangements for the telecommunications sector represented a considerable innovation in British administrative practice, although they have subsequently been copied in the case of other privatised utilities. Having an independent regulator is intended to separate the process from day to day politics. So far, the arrangement appears to have achieved this goal, although the system has not yet been tested by a change in the governing party.

Not surprisingly, operators have criticisms of the arrangement. In particular, BT has criticised OFTEL's capacity to make an extremely broad reference to the MMC in a matter involving licence modifications. The company claims that the regulator can force the acceptance of undesirable licence modifications by threatening to make a broad and time-consuming reference involving extraneous issues. BT has also been critical of proposals for licence modifications which give the DGT what the company feels is excessive discretion.