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BT escapes threat of immediate break-up

Deal thrashed out between BT and Ofcom

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BT has cut a deal with regulator Ofcom and escaped the immediate threat of dismemberment.

The settlement announced today by BT and communications regulator Ofcom ends 18 months of uncertainty for the industry after years of bickering about BT's dominance of the UK's telecoms sector

Full details of a new regulatory deal won't be published until the end of the month, but the key issues have been thrashed out.

According to Ofcom, it means that the cost of phone calls should continue to fall alongside the development of faster, innovative broadband services such as internet telephony and video on demand.

The deal also provides "regulatory certainty" for operators that want to invest in rival telecoms services to compete effectively with BT.

Although BT will not be broken up for now, the threat of splitting the company remains as the settlement is "in lieu of a reference to the Competition Commission under Section 155(1) of the Enterprise Act 2002" - the formal process that would lead to the breaking-up of BT.

Instead, Ofcom has made the new regulatory framework "legally binding and enforceable" in the High Court, giving rivals the opportunity to claim compensation for any breach.

Key to this new approach is the creation of a new, separate business unit within BT - known at the moment as "Access Services" - which will have its own new brand and identity. Manned by around 30,000 workers, it will have treat all telcos - including BT Retail - equally.

In the past, rival operators have argued that BT Retail - which has some 18m phone customers - was given preferential treatment at the expense of others.

Under the new regime all telecoms operators will have access to the same products, prices and back office processes "to ensure all providers are able to order, install, maintain and migrate connections for their customers on equal terms".

Welcoming today's agreement, Ofcom chairman David Currie said: "We believe these proposals have the potential to encourage more sustainable competition, more services, lower prices and greater consumer choice."

Ofcom chief exec Stephen Carter added: "Effective regulation for the telecommunications industry needs to be forward looking, needs to encourage competition in the right places and needs to deliver tangible benefits for customers."

"These proposals are substantially different to traditional telecommunications regulation. They demand significant changes in key areas, and recognise that in other areas regulation can be rolled back." ®

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