UK telecoms watchdog Oftel has been accused of failing the country's internet economy by allowing BT to stifle competition and growth.
According to a report in the Financial Times, senior officials at the European Commission have lost confidence in Oftel and have warned that the UK is falling behind other European countries.
An adviser to Europe's ecommerce commissioner claims the UK has "relegated itself from the premier league" of European telecoms regulation and is falling into the "relegation zone of the second division".
Olli Rehn, Head of Cabinet for Erkki Liikanen, European Information Commissioner, is quoted as saying that while things are developing fast in other member countries, the UK has been far slower to introduce competition.
His comments follow the criticism earlier this week from telco RSL Com, which accused the regulator of favouring BT in the broadband internet arena. The company withdrew its bid for access to local exchanges, saying Oftel had given BT a "head start".
An RSL Com representative accused Oftel of giving BT "time to tighten its grip in the prime markets while competitors are left to struggle for market share in the least populated exchanges".
US telecoms group WorldCom has also scrapped plans to bid for access to the UK's local exchanges this week, citing "commercial reasons". So far, 28 companies have been granted access to 360 of the less popular exchanges.
Oftel has said it refutes any allegations that it has stifled internet growth in the UK and said it believes the country is leading the way in developing internet access.
An Oftel spokeswoman said: "The UK has been proactive in developing broadband and narrowband internet access. We have developed the flat-rate internet access origination [Friaco] tariff, enabling cheaper internet access for consumers, and other European countries have been looking at this. The legal framework for unbundling the local loop came into force in August, well before the end of year deadline."
Oftel also denied newspaper claims that the government is considering scrapping the watchdog in favour of a new single authority called Ofcom. A spokeswoman said that while the government plans to develop a single authority due to the advent of convergence it does not mean Oftel will be abolished.
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