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MPs 'unconvinced' about need to break-up BT

Concerns raised about LLU pricing though

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Internet Security Threat Report 2014

A group of MPs remains "unconvinced" for the need to split up BT maintaining that pursuing the "nuclear" option should only be a last resort.

A report by the Trade and Industry Select Committee (TISC) into the Telecoms Review by Ofcom found that MPs broadly supported the progress made so far by the regulator.

TISC agreed with Ofcom that there is no need to split BT's retail and wholesale divisions as part of a major intervention to increase competition, although this was not to say that BT might not decide to divide itself sometime in the future.

Said Martin O'Neill MP, Chairman of the Committee: "We reiterate our opinion that the case for forcing BT to structurally separate has not been made, and that Ofcom's pursuit of genuine equality of access is the best way forward. It may be that equality of access prompts BT to voluntarily separate; however, that is a matter for BT's management and shareholders."

Instead, TISC agreed with Ofcom that "equivalence" - which includes giving rival telcos equal access to BT's wholesale product range - is the best way forward. Bolt on the competition generated by unbundling the local loop (LLU) and things should be hunky dory.

Well, kinda.

First the easy stuff. "The Committee remains unconvinced by the case for forcing BT to separate and agree with Ofcom that pursuing genuine 'quality of access' is the best regulatory approach to take. Only if this proves unworkable should forcible separation be considered."

Which is good news for BT.

"[And]...in the absence of substantial investment in end-to-end networks or alternative access networks, Ofcom's pursuit of Local Loop Unbundling (LLU) is the best way of introducing a more varied broadband market."

Which should be good news for rival telcos keen to invest in LLU.

However, TISC raised some alarm at BT's proposals to vary prices that are currently applied nationally so that it can compete in areas where LLU takes off. This approach was announced in February when BT announced price cuts for its end-to-end wholesale IPStream broadband product. Snag is, price cuts of around eight per cent will only be applied in areas where there is "a combination of high customer demand, high take up and lower costs".

As critics pointed out at the time, the announcement - while seemingly good news for consumers - means the former monopoly can change the pricing for its own products "on a whim". And by changing prices at a stroke, BT can effectively change the economic viability of LLU.

For operators looking to spend cash installing their own kit in BT exchanges to provide services direct to customers, such action by BT would mean they would have no guarantee that BT wouldn't pull the rug from under them and chop its own wholesale prices as it sees fit.

"It is entirely in BT's power to do as it likes," said one industry insider.

And MPs seem to agree. Said TISC: "BT's decision to 'de-average' wholesale prices - vary them from area to area - has created uncertainty which may jeopardise future LLU plans."

Now that such an influential group of MPs has pointed out such a glaring issue, no doubt Ofcom will act to ensure that BT doesn't "jeopardise future LLU plans". Hmmmm? ®

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