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Ofcom plays down BT split rumour

'Hypothetical and discursive' mootings

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Ofcom has played down speculation that it is working on the "pros and cons" of splitting up BT.

Today's FT reports that the UK's giant communications regulator is examining the merits of splitting BT's wholesale and retail divisions. Such a move would free BT Retail - which still accounts for more than 70 per cent of domestic phone lines in the UK - from regulation and been seen as a move to improve competition in the sector.

However, Ofcom has played down speculation surrounding a possible break-up, claiming it's just one of the issues being discussed as part of its Strategic Review of Telecommunications.

"We are exploring a large number of 'what if?' scenarios to inform our overall thinking about the future direction of the telecommunications sector," said a spokesman for the regulator.

"All such discussions are entirely hypothetical and discursive in nature. They are simply intended to provide an initial understanding of the implications of possible changes in the sector over time and do not in any way indicate a decision on a course of action."

The regulator is expected to publish the first phase of its consultation into the UK telecoms sector later this week when the matter, no doubt, is likely to be brought into focus. However, only two months ago an influential group of MPs rejected calls to split the UK's dominant fixed line telco claiming such as move did "not justify the upheaval involved". Although MPs accepted that such a move might be popular with some of BT's rivals, they also concluded that such a move wouldn't remove the need for regulation, merely shift it instead.

Perhaps of more immediate concern for BT is Ofcom's much-awaited decision following its "urgent" investigation into allegations that the telco's new phone tariffs are anti-competitive.

In March, BT announced plans to scrap its "standard rate" in a move it said would simplify its tariff structure and make its service even better value for money for its customers. Rivals were quick to point out that scrapping its standard rate would increase the cost of competing services run by companies such as The Carphone Warehouse, Telse2 and Tesco.

In what is regarded by many as its first major test as the new communications regulator, Ofcom launched an investigation under Chapter II of the Competition Act into BT's new residential retail tariff packages for line rental and calls.

The investigation is examining if the changes - which include the scrapping of standard rate line rental - constitute an abuse of BT's dominant position under the Competition Act 1998.

An initial ruling is expected within the next week or so and the Sunday Times reckons the regulator could "take a hard line against BT". If Ofcom's ruling does go against BT, the regulator could force BT to cease or reverse the proposed new tariffs. For its part, BT has said in the past that the tariff changes are "wholly in line with our legal and regulatory obligation".

A spokesman for BT declined to be drawn on the matter except to say: "Ofcom has made no formal announcement on their decision, and it would be inappropriate to comment until the decision is made public." ®

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