Industry observers believe the criticisms cast doubt on the whole unbundling process - where rival telecoms operators bid for space in BT's local exchanges.
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Nine of the original 27 suppliers that signed up to the process have already abandoned their plans, with many criticising BT for "deliberately thwarting" the unbundling progress.
UK business is relying on unbundling to provide the affordable, high-bandwidth Internet connections essential for e-commerce.
Last month, Oftel scrapped the bow wave process, its programme for allocating space in BT's local exchanges. The committee questioned the wisdom of proceeding down that route in the first place. "The situation is in danger of becoming farcical," it said.
On the practical aspects of the process, the committee said, "Some senior [Oftel] officers had not even visited an exchange. This episode has shown up some weaknesses in Oftel's grasp of the technical issues involved."
An Oftel spokesman said, "Local loop unbundling is a complicated process and the report makes clear that there is no one party at fault for the problems."