BT faces 'bogeyman' if it fails to open market

Change, or else...

By Tim Richardson, 28th January 2005

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Ofcom has once again warned that BT's failure to restructure its business and open up its market to genuine competition would make an enforced structural split of the company a "real possibility".

In November, Ofcom rejected calls to break up BT and instead urged the telco to make "substantive behavioural and organisational changes" and provide equal access to its wholesale product range. Such changes would lead to greater competition and a better deal for consumers, said the regulator.

But if BT fails to make the necessary changes then Ofcom warned that it would begin an Enterprise Act market investigation, and referral to the Competition Commission in a bid to split up the UK's former telecoms monopoly.

With less than a week to go until BT is due to respond to Ofcom's demands, Ofcom boss Stephen Carter told a meeting of the Westminster eForum that the regulator remains committed to opening up the sector to competition.

"Let me be clear. The possibility of an Enterprise Act investigation is not simply a bogeyman to secure the façade of co-operation from BT," he said on Wednesday. "It is and must remain a real possibility if, reluctantly, we conclude that true equality of access cannot be achieved."

What if?

So, just for argument's sake, what if BT does not give the necessary assurances that Ofcom wants? What if BT sticks two fingers up to Ofcom and tells the regulator that it "cannot countenance the kind of equality of access - behavioural change and product level equivalence - that we [Ofcom] have said is essential?"

Carter said Ofcom could use existing powers to tackle each of the outstanding issues.

"But to impose such remedies in the face of BT's active hostility... would be a very complicated and time-consuming task. It would need to be done case by case, product by product and market by market, with BT having the opportunity to appeal our decisions at every stage."

And although he accepts that the use of the Enterprise Act would lead to delays and uncertainty, "imposing real equality of access in the teeth of sustained opposition would impose even more delay and uncertainty and ironically would probably involve not one but several trips to the competition commission to resolve.

"An Enterprise Act referral, whilst undesirable in many ways, would be less undesirable than a protracted attempt to impose real equality of access via the sector powers route," he said.

However, unleashing the "bogeyman" would not happen overnight. Not only would Ofcom have to digest fully BT's response, with all the signs pointing to a Spring general election Ofcom does not feel this would be a great time to announce decisions that "could have significant market and public policy impact".

Last weekend, BT boss Ben Verwaayen warned that more than half of UK homes and businesses could be left without advanced broadband services if Ofcom continues to press ahead with plans to make the UK's telecoms sector more competitive.

Verwaayen argued that the regulator's preference for local loop unbundling (LLU) would lead to a new digital divide with rival telcos cherry-picking the most lucrative exchanges leaving vast swathes of the UK without up-to-date services. ®