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BT faces life-changing three months

Will it? Won't it? Can it? Should it?

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Life is full of challenging questions such as establishing which came first - the chicken or the egg? Who cares, they both taste great especially when curried. Then there's the one concerning a leopard's ability to change its spots. Or, the 2004 version of this puzzler - can BT really switch from being a former monopoly with massive market share into something that meets the regulator's vision of delivering "sustainable competition"?

To be honest, the answer to this question can only really come from BT. That's because communications regulator Ofcom has identified a string of problems (or "bottlenecks" as it puts it) which it believes are distorting the market. Instead of prescribing a remedy for these problems, the regulator is calling on BT to come up with a way round it. You're the problem, Ofcom effectively told BT, now sort it out. Clever.

For while Ofcom has said where it wants to be, it's up to BT to devise a route and get there. Unlike the days of former telecoms regulator Oftel, change will not be imposed on BT - instead it will have to change itself. What's more, the UK's dominant fixed line telco has got just three months to come up with a roadmap setting out its path to telecoms market harmony.

According to Ofcom, BT needs to address "head-on" the barriers preventing competitive wholesale access to BT's network. When it comes to the provision of wholesale voice and data services the telco needs to treat its competitors in the same way it treats its own customer-facing division, BT Retail.

Said Ofcom last week when it published its findings into the UK's telecom's marker: "Delivering this would not only require BT to make changes to its wholesale products, product development process and transactional processes; it would also require BT to commit to substantive behavioural and organisational changes. It is clear that such changes are a necessary pre-condition if there is to be any confidence that BT will not discriminate unfairly against competitors and in favour of its own retail business."

If it doesn't, if BT fails to reform sufficiently, then Ofcom will refer BT to the Competition Commission where it will face the threat of being forcibly split.

Some industry watchers claim the giant telco has little choice but to meet Ofcom's demands and play ball with the new regulator, although until something official is announced no course of action - including BT calling Ofcom's bluff - should be ruled out. But here's the thing. If BT is to meet Ofcom's demands and level the playing field, by how much would BT Retail have to distance itself from BT Wholesale? Would an arm's length separation be enough or would the gap need to be so wide that there was clear blue water between them?

For even though Ofcom insists that it doesn't want to break up BT claiming such a move would be "too disruptive and expensive", there are some who argue that if BT complies with Ofcom then it will lead to the virtual separation of the monster telco. Whether it's virtual or structural separation - BT is set for a big change. ®

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