Oftel pushes to keep phone ban

British Telecom's hopes for an early end to the ban on broadcasting entertainment down its phone network have been dealt a serious blow by the industry watchdog, Oftel, fuelling doubts about the strength of the group's special relationship with the new Government.

Don Cruickshank, the telecommunications regulator, is understood to have advised the Department of Trade and Industry that the entertainment ban could not be lifted unilaterally without a much broader and more lengthy review of broadcasting policy.

The Oftel submission, made a couple of weeks ago, warned that the "ban" affected all the national telephones operators and not just BT. Ending the restriction would involve radical changes to the wider policy on the way broadcasting licences are awarded, including the role of the Independent Television Commission, which could need changes to the legislation.

The advice follows comments by Chris Smith, Minister for National Heritage, shortly after the election victory which impliedthe ban could disappear next year if BT carried out its pledge to connect schools, colleges and hospitals to the information superhighway for free. A source close to Oftel said yesterday: "Don is making his position clear to ministers before they go ahead with the policy."

Another industry source said: "Since Oftel gave its advice to the Government there has been total silence from Whitehall on the issue."

The existing policy is that BT cannot offer broadcast television services down its network for 10 years from the start of the first cable TV franchises, which means the first review of the policy would be in 2001. In opposition Labour had backed a report by the Commons trade and industry select committee which concluded the ban should probably be lifted next year.

Oftel is thought to have told the DTI that granting BT a national broadcasting licence would complicate policy for other operators, including the ITV companies and the new digital terrestrial groups.

Reviewing the policy and changing the legislation, which was designed to encourage cable operators to make the heavy investment in local networks, would be difficult to complete by next year.

Doubts about BT's deal with Labour have grown since the election after Oftel revealed it had asked the company to offer low-price superhighway links to schools anyway and emphatically denied any link with the broadcasting ban. BT had hoped to launch its schools initiative last week but the announcement had to be abandoned after objections from senior government figures.

The move came at a sensitive time as BT waited to see whether it would be hit by the windfall tax on the privatised utilities. However ministers were concerned at giving the impression the company would escape the levy because of the schools deal.