Twenty years on we can see the defects in the Conservatives' formula for privatisation and competition in telecoms - not as bad perhaps as the railways but still serious. I was in charge of the 1969 act that converted the old GPO into a Morrisonian nationalised industry.
The sledgehammer monopoly I was perpetuating on Labour's instructions made me uncomfortable. By 1981 I was managing director of BT's inland operations. The Conservatives' preparations for privatisation made me much more uncomfortable, but there was nothing I could do. I left BT in 1983 but have continued to work in telecoms.
BT's recent tribulations effectively spring from its failure to exploit the hugely growing cash flow and the R&D capability it inherited from the public sector. BT still makes the running in this country and we have fallen behind developed countries in technology and service innovation. The nationalised industry had world-class mileage - Prestel, the forerunner of the internet, was a celebrated example.
Since privatisation, BT has tamely followed where others have led. The reasons are obvious. Just like the railways, short-term stock-market pressures have provided a direct disincentive to investment. The price-cap system used for BT and other utilities was presented as promoting "efficency" while leaving profits unconstrained - an extraordinary kind of regulation.
The real objective was to push up the share price and get Conservative ex-ministers seats on boards. The reduction in BT manpower is held up as proof that the policy of capping price increases works. This is phoney. BT's manpower actually increased to a peak six years after privatisation in 1990.
It then contracted simply because the workload dropped as a result of falling growth and the completion of the modernisation programme of the nationalised industry. And the price cap helped depress investment by putting a premium on minimising capital charges on current account.
The claims for the effects of competition in network telecoms do not stand up either. Oftel recently announced that in a comparison with France, Germany, Sweden, Italy and two US states, British prices for business communications came out unexpectedly high.
Competition from the cable companies can hardly be said to have stimulated BT, for they have been struggling for years, hampered by burdens of idle investment forced on them by Conservative governments obsessed by the idea of infrastructure competition. This business of having competing local telecoms' infrastructures provides a remarkable example of how the Conservatives substitute ideology for industry logic.
The loss of economies of scale due to network duplication is so high and the usage per telephone line so persistently low that even with the extra business from cable TV, the resulting idle capital burden can never be absorbed by operating economies. The cable companies have found this out to their cost.
Radio has come to the rescue of the consumer, but the unnecessary cost of infrastructure competition will dog wire service for a long time. Telecoms is suffering from the same lousy structure created by the Conservatives for the railways.
When they took over in 1979, BT was already too big and diverse to manage properly. I began a subdivision process in 1982, reversed after I left. The stock market wanted a nice big monolith with nice big profit figures. The present wired service set up of rival vertical firms providing networks and services goes back to Alexander Graham Bell.
It is bogging down the internet and new economy in endless squabbles and delays. BT is at last in the mood to subdivide, and should get on with it. How about New Year's Day as a deadline?
This will provide an unrepeatable opportunity to get the structure of the industry right. Oftel is pointing the way. We need to push unbundling to its logical conclusion. We must completely separate services and retailing from network provision and operation. Then it will be necessary to free up all services to deregulated competition; re-unify the wired network infrastructure nationally and hammer out a "third way" ownership formula. If the firms won't co-operate, government should intervene.
• John Harper's book Monopoly And Competition In British Telecommunications is published by Pinters (Cassells)
