Cost-cutting is yesterday's news at ITV

CHARLES Allen, the boss of ITV, was looking decidedly relaxed when we met for lunch at London's trendy Cinnamon Club restaurant recently. Not that he is ever anything other than affable, but he had reason to be particularly pleased with himself.

He had survived the shareholder putsch that felled his putative chairman Michael Green and had just conducted a tour of ITV's top ten shareholders and emerged, satisfied that he was not next in the firing line.

Presumably, shareholders were convinced that he is a racing certainty to deliver £100m-plus of savings resulting from the near £6bn merger of Carlton and Granada that created ITV plc.

He has so many aces up his sleeve - unwanted properties, saving the cost of Premiership football highlights and a rag-bag of investments that could be sold - that the group's piggy bank could be positively bursting in a year or so.

And Allen is convinced that sponsorship deals such as the one he struck with Travelex for the Rugby World Cup - despite infuriating rugby lovers who wanted chat rather than commercials - will maximise revenue from advertisers.

He is even feeling sufficiently confident to risk alienating programme producing luvvies by telling them to forget the ratings battle. Allen will settle for fewer, more upmarket viewers for whom advertisers are prepared to pay about ten times more than they would for the chance to get their message across to massed couch potatoes.

The shareholders may, so far, have bought into Allen's promises. But that does not hold for some of the people around him at the most senior level in his company.

I understand that questions are being asked about whether Allen has the ability to do the 'vision thing'; to find a way forward for ITV that will make it look less plodding in comparison with Sky and the BBC, its major rivals.

Chairman Sir Peter Burt has made no bones about his determination that Allen must expand the business or face the sack.

Now others are saying he needs to set the good ship ITV on course - and fast. One senior insider confided: 'You cannot take a year to develop a strategy.

'Cost-cutting thinking was fine when we were going through the merger, but we are through that now and it cannot be a fig-leaf for an uninspiring strategy.

'There needs to be vision and Charles Allen needs to execute that with a sense of urgency.'

Allen may be in the clear with shareholders, but it is distinctly murkier at the top levels of his own company.

BT or not BT

SO, new Ofcom chief Stephen Carter has decided to tackle one of Britain's great regulatory problems - whether BT should be broken up.

Certainly, there are plenty of companies competing to grab the former monopoly's customers who say that the only way to achieve real competition is to pull away BT's network.

Almost undoubtedly that would spark price cuts in calls and would probably mean cheaper high-speed internet access. BT's retail arm would rapidly lose its 70% share of the phone lines market. But at what cost?

Some point to improved service and better prices after competition in the gas and electricity markets.

But there is also the unholy example of Railtrack to consider. Once services were separated from the network, were billions spent on bullet trains or rebuilding bridges to make room for doubledecker commuter carriages? Or did Railtrack stop investment and slash costs to the bone?

No one will die if the UK stops spending on its telecoms infrastructure, but there are dangers if innovation at the core of the information industry stops and stagnation sets in.

Luckily, it seems that Ofcom will ignore the calls. Carter seems to believe that those who have entered the voice call market are, by and large, parasites on the BT network. Instead, Carter is looking at the vital area of pushing high-speed internet access. Price must be driven down by competition. But, to those listening closely last week, he did not suggest a full-frontal assault on BT as the smart way forward.

He wants a halfway house. BT remains intact, but the network business will be forced to treat all customers the same (full functional equivalency, if you insist on the jargon). Despite 20 years of competition, BT Retail does not pay the same - or buy the same products from BT Wholesale - as its rivals.

BT is a past master at doing just enough, just in time, to head off serious regulatory action.

Breaking up such a complex business would occupy an army of professors for years. Yet without major investment and big price cuts, Britain risks suffering for decades.

The only other things on Carter's plate are the sale of The Daily Telegraph to one or other of the world's most powerful media barons and the future of the BBC. Easy peasy, then.