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Ofcom tells BT: shape up, or split up

Telecoms review published today

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Ofcom has rejected calls to break up BT, following its review of the telecommunications sector. The regulatory is still wielding the threat of a forced split as a stick with which to beat the company, if it does not play ball.

It has called instead for the telco to make "substantive behavioural and organisational changes", and provide equal access to its wholesale product range. It hopes this will lead to great competition, and a better deal for consumers.

Breaking up BT would be a tricky, needing an Enterprise Act market investigation, and referral to the Competition Commission. Although many smaller players were keen on the idea, Ofcom's report says the move would be unpopular with most of the rest industry because of the disruption is would cause. It concludes that the move is not "appropriate", right now.

BT agreed that providing equal access is preferable to being broken up. However, Ofcom notes that there were "significant differences of interpretation" as to what needed to be done to provide equal access, and set the scene for effective competition.

Ofcom concluded that if equal access fails and BT does not change sufficiently, then splitting the telco would be appropriate as a last resort.

The review is also critical of Oftel's past regulations, describing them as ineffective in dealing with BT's "entrenched power" in the fixed market. Many of the regulations had encouraged unsustainable business models, it said, making investors reluctant to put money into new ventures in the sector.

Ofcom Chief Executive Stephen Carter said: "Twenty years after liberalisation, the market has made good progress. However, its foundations are unstable in parts, overly dependent on intrusive regulation and with limited sustainable competition."

The full review is available here (pdf). ®

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