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BT secures new deal with Ofcom

Handshakes and smiles all round

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BT has promised never again to engage in the kind of behaviour that "restricts competition" and "discriminates" against its competitors.

The "legally-binding undertakings" - 230 of them to be exact - form part of a regulatory settlement with communications watchdog Ofcom. Had BT and the regulator failed to reach agreement it could have led to the break-up of BT.

Instead, the deal is being billed as a new chapter for the UK's telecoms sector and should help create a level playing field for telcos in the UK.

Announcing the deal today Ofcom said that BT "has agreed to substantive structural, product and governance changes, affecting both its current and future networks".

If the regulator has got it right, BT should no longer be able to abuse its position as the UK's dominant fixed line telco at the expense of competition.

Key to the new deal is the creation of a new access services division within BT called Openreach which will ensure that all telcos get equal access to BT's network.

Ofcom is confident that the new separate division - which will provide access to the local loop, for example and be overseen by an independent body - will allow "all communications providers to gain real equality of access to critical BT infrastructure on fair and equal terms".

The regulator also reckons this new set-up will encourage investment in infrastructure and promote innovations while leading to greater competition, lower prices and improved services.

"After a full year of detailed consultation, Ofcom has accepted BT's commitments. The new management of Openreach and the Equality of Access Board must now deliver - and be seen to deliver," said Ofcom chief exec Stephen Carter.

Today's settlement comes follows Ofcom's strategic review of the UK's telecoms industry. Rival operators have long complained that BT Retail - which has some 18m phone customers - was given preferential treatment by other parts of the BT organisation at the expense of others. They also complained that BT dragged its feet over the introduction of new technologies.

In a report published in the summer Ofcom highlighted some of those concerns.

"Ofcom suspects that competition is being restricted in markets for the supply of wholesale access and backhaul network services in the context of electronic communications in the United Kingdom and on directly related downstream retail markets," it said in one document.

Another said: "Ofcom believes that the combination of ... upstream market power and vertical integration provides BT with both the ability and the incentive to discriminate against its downstream competitors, who are also its wholesale customers.

"Moreover, Ofcom suspects that BT may have engaged in conduct which has had the effect of restricting competition." ®

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