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The E-minister has defended BT's role as the dominant telco in Britain.

Appearing before a select committee on Wednesday to discuss the Government's Communications White Paper, Patricia Hewitt was asked whether there was a case to split BT in two with one half operating the network and the other providing network services.

The question arose, no doubt, since many observers believe that the nation's advance to broadband is being held back by BT's role as both wholesaler and retailer.

This, claim BT's critics, gives it no incentive to engage in the competitive process and gives it every reason to maintain the status quo.

The question about the future structure of the monster telco echoes a demand made in October last year by Tory shadow Chancellor, Michael Portillo, for BT to be broken up.

However, Ms Hewitt disagrees and as she quite rightly points out: "BT of course are currently themselves considering restructuring which would include separating within the United Kingdom their wholesale and retail businesses. Clearly there may well be some gains in terms of regulatory simplicity and transparency, particularly to other operators, were that to be done. It is also a very complicated issue and the restructuring of BT raises a lot of issues about, for instance, where the licence would sit, where the universal service obligation would sit, what the regulatory implications generally would be.

"My officials and those of Oftel are in discussions with BT at the moment about that. On the issue of disincentives, I think the situation has changed very significantly largely as a result of regulatory action. BT is now under an obligation as a result of the licence amendment that they agreed last year to unbundle the local loop. They are also under an obligation, again a regulatory obligation, to offer access to their networks, including their upgraded networks, on fair and non-discriminatory terms.

"In other words, they are not allowed to discriminate between their own retail arm and other operators. They have to charge the same wholesale price for network connections to their own retail arm and other operators.

"That is extremely important in getting these services rolled out.

"They are also making very substantial investments, probably totalling about four or five billion pounds over some years, in the ADSL upgrading of those exchanges. They have a very clear incentive to get a return on that investment both by maximising the success of their own retail operation and by ensuring that they have as many other customers, basically wholesalers and resellers, connected to those networks as well. I think that through tough regulatory action we have given BT the right set of incentives," she said.

At the same committee hearing Ms Hewitt appeared to tie herself in knots when asked to give a definition of broadband. ®

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