Ofcom is to publish an update on its mammoth Strategic Review of Telecommunications tomorrow in a move which could end months of speculation about the future of the UK's telecoms industry.

At stake is whether BT has done enough to convince the regulator that it is prepared to open up its network to genuine competition. Failure to do so would leave Ofcom with no choice but to launch a full-scale Enterprise Act investigation that could lead to the eventual break-up of BT.

Recent reports had suggested that Ofcom and BT had struggled to reach a settlement although this was dismissed by the telco. At the weekend the Sunday Times reported that BT had signed up to "big financial penalties" if it failed to comply with new measures designed to promote greater competition in the UK.

If true, then it suggests that BT is preparing to fall in line with Ofcom's demands for changes to the UK's telecoms sector.

Background

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.

But although Ofcom has always said that its preferred option is "Real Equality of Access" - a move which would give rival operators equal access to BT's network and products - it has never shied away from threatening to split BT's Retail and Wholesale divisions if necessary.

Some in the industry claim that such action would be disastrous and lead to years of uncertainty. Energis, on the other hand, believes that after 20 years of privatisation, BT is still faced with the same "fundamental conflict of interest".

Energis boss John Pluthero said earlier this year: "There's this fundamental commercial conflict that we ask BT to manage today, which is nonsense. On the one hand, BT is in the market selling to customers. On the other hand, it is supposed to be providing its wholesale customers like us (BT's rivals) with competitive deals. If it does that second job well, it is selling its own shareholders down the river." ®

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