Post Office Telecommunications was set up as a separate department of the UK Post Office, in October 1969. The Post Office Act of that year was passed to provide for greater efficiency in post and telephone services; rather than run a range of services, each organisation would be able to focus on their respective service, with dedicated management. By law, the Post Office had the exclusive right to operate the UK national telecom network, and limited ability to license other providers' services and equipment.
The 1970s was a period of great expansion for the Post Office. Most exchanges were modernised and expanded, and many services, such as STD and international dialling were extended. By the early 70s, subscribers in most cities could dial direct to Western Europe, the US, and Canada; by the end of the decade, most of the world could be dialled direct. The System X digital switching platform was developed, and the first digital exchanges began to be installed. However, progress came at a price. Investment was stifled by public spending limits, and long waiting lists for telephone lines developed, sometimes for years.
In 1979, the Conservatives, driven by an ideological preference for the private over the public sector, and justifying the policy on the basis of the scale of investment needed if the UK was to remain a global competitor in communications services, decided that telecommunications should be fully separated from the Post Office. By 1981, the British Telecommunications Act was passed, and the service became British Telecom in October that year.
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