Ofcom Mulls Break-Up of BT on Competition Grounds

26 April 2004

British Telecom, the UK's third largest advertisers, is to be formally examined by Ofcom, the recently formed media and telecoms regulator. The process will determine whether the splitting of the former state monopoly would boost competition in the telecoms sector.

The long overdue move is similar to that of the US government against AT&T over a decade ago which resulted in that company's break-up.

Ofcom's chief technology officer Peter Ingram has been tasked with weighing the case for separation of one or more of BT's businesses. There is a certain piquancy in his nomination, given that he is a former head of technology at BT Retail.

Serenely dominant in the aftermath of its state monopoly, BT retains 73% of Britain's residential telephone line business. Many critics charge the giant with arrogance in its dealings with consumers and small business customers.

One scenario under examination is the separation of BT Wholesale (the group's network division) from BT Retail. A leaked internal memo written by Ingram implies that such a move could remove a substantial regulatory burden from the telecoms titan.

Separation would mean that only the wholesale business -- in particular BT's lucrative "last mile" copper-wire connections direct to households -- would be subject to regulation by Ofcom. BT, however, is less than enthusiastic at the prospect of a forced break-up.

"We're confident that there is no valid argument to break up BT," said a company spokesman over the weekend. "Any argument that BT Retail receives preferential treatment from BT Wholesale is complete nonsense."

Data sourced from: Financial Times; additional content by WARC staff