It was regulation and competition that transformed BT into what it now is. There is plainly much wrong with the present market-driven approach to development of the superhighway - but giving even an inch back to BT may not be the answer.Cavalier behaviour of Deutsche BankLittle wonder that the Germans had to look beyond their borders to acquire investment banking nous. It was not that many years ago, however, that BT was being written about in much the same way as the electricity companies now - as one of the most hated institutions in the land. There are all kinds of reasons for this; BT is at the forefront of technology, which is where Labour wants to be, internationally it is highly respected and its standing among customers is considerably higher than more recent privatisations.But it is also distinguished because it is seen to operate in a competitive environment Mr Blair has made that distinction.

There is always a whiff of corruption about such mutual backscratching, however laudable the purpose. The deal points up some obvious contradictions in Labour policy towards business.Among the privatised utilities, BT seems to enjoy favoured status with Labour. The purpose of government is to create a framework of public policy in which to operate, not to do private "sweetheart" deals with individual businesses to achieve those policies. Without Mrs Thatcher, Sir Iain might well still be a subpostmaster Sir Iain shrugs his shoulders. Building bridges with the Opposition - helping it win votes - is always going to be dangerous for a highly regulated monopoly but the way he sees it, ministers have already punished him as much as they can He has nothing to lose Whether the same is true of Labour is another matter. BT is the showpiece of the Government's privatisation programme. For Labour it provides a rallying cry that puts the party in the vanguard of all that mumbo jumbo about information superhighways (shades of the white heat of technological change here).

Here is something, Mr Blair is able to say, that we in Opposition can do but ministers cannot Think what we could do if we actually had power Pure politics, in other words Ministers are furious For some, BT's flirtation with Labour is treachery. The much more limited "free" network being promised to schools, colleges, libraries and hospitals, would cost no more than pounds 60m, according to industry estimates - an investment which BT might have been expected to make anyway since many of these institutions are high-volume telephone users.This deal is no one-way street, however. pounds 15bn represents the maximum cost of delivering a spanking new fibre-optic network to every telephone user in the UK BT is a long way from committing to that. It will be BT, not cable, that strikes the deals with Mr Murdoch and the other entertainment providers.What does it have to do in return? Not very much seems to be the answer. BT is unsurprisingly evasive when it comes to estimating the investment cost of its pledge to provide a broadband communications system to all public institutions in the country but the pounds 15bn figure that Labour has cleverly managed to palm off on the press has nothing to do with what has actually been promised.

Barely more than two years from now, it should, Labour victory allowing, be able to compete on an equal footing with cable at least in some areas. With luck, BT figures, Britain's nascent cable TV industry will still be insufficiently developed to pose a serious threat. For years BT has been lobbying the Government for permission to provide broadcast TV down its telephone lines. Despite some sympathy, ministers have resisted this on the grounds that to lift the ban early would be a breach of its agreement with cable TV - which has been investing billions in advanced fibre-optic networks on the understanding that it had a free field at least until 2002 and possibly longer. What Labour appears to have pledged is that the ban will be progressively phased out from 1997 ending absolutely in all areas in 2002. Though the stock market seemed to be taking a remarkably sanguine view of it yesterday - cable TV share prices barely moved - this is a breakthrough of considerable commercial importance to BT. Sucking up to Tony Blair seems to be quite the thing among businessmen with entrenched monopoly positions in fashionable industries - media and communications.

Judging by the deal BT has managed to extract from new Labour, it pays dividends. In return for what in truth adds up to little more than a hill of beans, BT has won a very considerable regulatory concession - albeit from a party not yet in power There is little doubt who has the better half of the deal First the concession. First Rupert Murdoch, now Sir Iain Vallance of British Telecom. In contrast the number of deals stayed static at 50 for the first nine months. Lazards topped the table for deals by value at pounds 10.7bn, followed by Barings, Morgan Stanley, Robert Fleming and NM Rothschild..