Make BT more transparent, say rival telcos

No need to break up BT - yet

By Tim Richardson, 23rd June 2004

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UK telecoms trade group - UKCTA - has called for a new "regulatory model" to be adopted by communications regulator, Ofcom, that would help curb BT's market dominance and lead to greater competition in the industry.

It claimed that its "Transactional Transparency" (TT) model would, if implemented, give rival operators greater scope to compete with BT.

Responding to the first phase of Ofcom's telecoms review, UKCTA said: " BT should be required to provide its access products to all operators, including its own downstream operations, to the same specification, at the same price and using the same processes (including product development)."

Although the group - made up of a host of telcos including Cable & Wireless, Colt, Energis, NTL and Thus - stopped short of calling for the complete break-up of BT, it does want to see greater operating and accounting transparency within the UK's dominant fixed line telco.

Responding to Ofcom's question as to whether the structural separation of BT - splitting its wholesale and retail business - was still a relevant, UKCTA said that it was: "20 years after privatisation, we are still faced with an incumbent that enjoys a dominant position not only in the access network where the underlying economics make a different outcome difficult, but also in the parts of the value chain which should be susceptible to far more effective competition.

"The situation in these markets, both network markets and retail markets, of an overly strong BT able to distort competition, is not conducive to delivering maximum benefit to the citizen-consumer and the UK economy which derive from the technological revolution we are witnessing today."

UKCTA's submission went on: "UKCTA does not currently strongly support full ownership separation of BT into a regulated access network business and a competitive business. In terms of creating the correct incentives for the regulated entity to treat all its customers equally, this structure would be optimal. However, it would be slow and difficult to achieve in the face of BT opposition. Also, where the line between the monopoly and competitive parts of the network are either not yet clear or likely to shift over time, ownership separation may be less successful than TT in producing the anticipated benefits.

"Furthermore, we would observe that were full structural separation ever to become the generally desired outcome as a means of delivering benefit to citizens and consumers, the chances of a smooth and successful transition would be enhanced if BT and its shareholders are convinced that they themselves will be able to reap tangible benefits.

"Such potential added shareholder value is, in our external view, virtually impossible to measure at the moment. But if TT is comprehensively implemented as we are advocating, it will become much easier for BT’s executives and owners to determine whatever future structural strategies are in their own best interests."

Not surprisingly, BT has rejected any notion that the company should be split up, maintaining that structural separation "would not be in the interests of the UK economy, UK consumers, the telecommunications industry or BT’s shareholders".

And it called on the regulator to "end debate over this matter", which it claims "adds to the level of uncertainty in the industry and therefore reduces all players’ incentives to Invest".

Instead, BT called on Ofcom to develop a "more targeted regulatory regime that can keep pace with technological change and so ensure the UK benefits from a vibrant telecommunications industry".

It wants to see a movement away from "micro-regulation" and see the focus shift instead to the regulator dealing with "bottlenecks" and "barriers to entry" rather than on market share.

It also wants to see a regulatory regime that encourages infrastructure investment instead of relying on mandated access to networks.

Said BT chief exec Ben Verwaayen: "Many markets are now extremely competitive and so there should be a relaxation of complex regulation particularly when new services are introduced and there are no barriers to entry."

Last week, the UK's two telecoms trade unions resolutely rejected any suggestion that BT should be broken up.

Even if the separation of BT could be achieved technically - which Connect and the CWU say would be "immensely complicated" - any British Government would find it extremely difficult to bring it about politically, said the unions in a joint statement.

Instead, the unions called on Ofcom to promote investment in the network and to help consumers better understand all the different options available to them. ®