Oftel could face legal action from BT's rivals if the regulator forces the telco to lower its collocation charges.

One operator said that companies which built business plans and submitted applications based on the costings could sue the regulator if installation costs fall. Oftel is under increasing pressure to coerce BT into lowering its charges.

Louise Lancaster, vice president for public policy and government affairs at Viatel, said: "As the costs come down, the goalposts move. Some operators could reasonably say that, had the cost of collocation been lower, they would have placed applications for more space and more exchanges. They could have legal recourse."

The high costs set by BT, and approved by Oftel, have been cited as a major factor in the low level of applications for the first wave of unbundled local exchanges, and the telco called an emergency meeting last week to discuss the problem. Of the first 25 exchanges to be made available, only 14 have so far received firm orders.

Richard Greco, managing director at Bulldog Communications, said that the charges are about six times more expensive than those being paid by German operators.

"On average the charge to collocate is £200,000. BT is charging for gold-plated rooms. Separate rooms are not necessary. Other features, such as security measures, should be at each operator's discretion," he said.

Greco added that Oftel indicated at the meeting that it would undertake an investigation into BT's costs.

The 25 exchanges in the first tranche are in areas that are not expected to generate lucrative margins, as they do not serve metropolitan areas. Even so, the watchdog is alarmed that the response has been so poor. It confirmed that only one or two operators had applied for space in each exchange, instead of the expected seven or eight.

Under European law, Oftel must ensure that BT's rivals can offer competitive high-speed internet access services by 1 July. An Oftel spokeswoman said that she would not comment on hypothetical situations.

First published in Network News