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A full-scale Enterprise Act investigation that could lead to the eventual break-up of BT will kick-off in June should efforts to introduce greater competition and transparency at the giant telco fail.

The June deadline was set by regulator Ofcom which is studying proposals by BT to open up the former monopoly to greater competition.

At the beginning of February BT announced it was prepared to offer "transparent and equal access" to its local network in a proposed regulatory settlement with Ofcom. It also planned to cut the cost of key wholesale products and create an Access Services division responsible for ensuring "equal access to the services and assets associated with the local loop".

The string of proposals formed part of BT's response to a year-long telecoms review by Ofcom. In November, the regulator rejected calls to break up BT, but warned that it would take action against the former monopoly, unless it made "substantive behavioural and organisational changes" - including giving rivals equal access to its wholesale products. Ofcom has always said that its preferred option is "Real Equality of Access", which would give rival operators equal access to BT's network and products.

Updating the industry yesterday on the progress made so far Ofcom senior partner, Ed Richards, said that the regulator was in the "middle of a long and complex process" and that trying to make the UK's telecoms sector more competitive was "taking longer than we thought".

In particular, Ofcom is spending a lot of time wading through BT's lengthy submission.

"That's because we posed BT a unique question: we asked BT's management to provide prompt and clear proposals for the organisational and behavioural changes within BT that we considered necessary for Equality of Access to work.

"And I think we should recognise that in this area we have received a constructive response by BT, which sets out a number of steps which could go some way to resolving this issue. To our knowledge, BT's proposed Access Services Division is the first time this kind of structural regulatory solution has been put on the table by an incumbent in a developed economy.

"We know that the devil is in the detail. We need to spend time reflecting on BT's response and working with BT to understand that detail. Until then, we make no conclusions."

He went on: "As we've said all along, we would prefer a settlement for which there is some significant consensus within the industry...that can be made to work, and that will deliver Real Equality of Access. We're genuinely optimistic that this can be achieved."

However, should Ofcom's optimism be dashed, it will not engage in a protracted regulatory debate.

"We believe that we need to have established whether or not Real Equality of Access is a sustainable approach by the end of June," said Richards. "We would then expect to publish our Phase 3 statement in the summer.

"If in June we concluded that Real Equality of Access was in fact not viable, we envisage that we would at that stage commence an internal Enterprise Act investigation. Should that investigation recommend a reference to the Competition Commission, we expect the timetable for such a reference to be towards the end of the year."

If that were to happen then Ofcom chief exec Stephen Carter believes that responsibility for the failure to come up with a workable solution would be shared across the industry, BT and the regulator. ®

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