The Office of Telecommunications (Oftel) strongly denied reports that it’s handling Internet deregulation so badly that it has lost the trust of senior government officials.

An Oftel spokeswoman said: "As far as Oftel is concerned, we totally refute the charge that Oftel has stifled the growth of Internet services. On the contrary, the UK has led the way in promoting cheap Internet-access in Europe."

Oftel determined last November that BT has a monopoly on the local-network lines and directed the telecommunications operator to lease the local loop. At the time, Oftel directed BT to upgrade the local loop to handle new broadband digital services for faster Internet connections.

Local loop Since then, Oftel has weathered heavy criticism over its handling of the unbundling of the local loop. David Edmonds, director general of telecommunications for Oftel, is being pressured to step down by officials within the government, according to a report published Friday in the Financial Times.

The government is also considering the option of replacing Oftel with a ruling body comprised of a various communications and media regulators lumped together under the name Ofcom, the report said. "This week, one senior Treasury official claimed that Oftel had become a victim of 'regulatory capture' - implying it was now dictated to by BT," the FT report said.

Deadlines The Oftel spokeswoman said Oftel is not dragging its feet on local-loop unbundling and that it was sticking to its time table. Last March, Oftel director of technology Peter Walker stressed that the unbundling of local network lines in the UK cannot be completed before the July 2001 deadline.

Edmonds also talked tough in an official press release issued on Friday, but did leave a door open to further delay. He said: "Only in exceptional cases, where there are significant problems outside BT's control will BT be allowed additional time."

Concern Officials in the European Union are becoming concerned about the UK's sagging competitiveness in the Internet market, the FT report claims. According to a top adviser to Europe's e-commerce commissioner, the UK has dipped behind France.

Olli Rehn, head of cabinet for European information commissioner Erkki Liikanen, said: "The UK has relegated itself from the premier league of European telecoms regulation to the relegation zone of the second division.

"Things have moved quite fast in other member countries. The UK was in the vanguard of telecoms liberalization, but has slipped substantially in recent years."