The body set up to regulate phone companies took formal action against them in just 8% of its investigations between 1995 and 1997, says a report by the Commons Public Accounts Committee.

Of the total 217 investigations during that period only 10% were initiated by Oftel itself.

Oftel's Jane Whittles tells John Humphrys how the watchdog is "regrouping for the new environment"

Underfunding and a lack of experienced staff means Oftel cannot properly deal with complaints against large companies, according to the report.

The committee says Oftel should improve staff training and adopt a more "pro-active" approach to dealing with alleged unfair practices to prevent work being undermined by lack of resources.

The committee's Chairman, Conservative MP David Davis, said: "Since the industry has so many more resources than the regulator, the quality, experience and training of the regulator's staff are of paramount importance."

In its evidence to the committee Oftel said the larger phone companies could pay much higher wages to attract expert staff.

Only 18 of its 180 staff worked directly on unfair competition and there was a lack of commercial experience at managerial level.

"In such 'David and Goliath' situations we need to make sure that David is well-armed," said Mr Davis.

In 37% of the cases taken up by Oftel, agreement was reached between the parties or the alleged anti-competitive behaviour was stopped without the need for further action.

But the report said Oftel would send a clearer message to the industry of its commitment to tackle anti-competitive behaviour if it took action at an earlier stage of its investigations.

Oftel spokeswoman Jane Whittles said she saw committee's report as "supportive".

"What we draw comfort from is the fact that they pick up on things that we said we recognised ourselves that we had to do, because we're moving from a regulatory framework to a competitive framework," she told BBC Radio 4's Today programme.

Increased competition in the industry over the next few years meant "the framework within which companies have to operate is going to change", said Ms Whittles.