BT Supports Ofcom Proposal

LONDON -- BT has today announced measures to help support a proposed new regulatory settlement. This settlement, to be based on guaranteed equality of access to BT’s local network, will deliver regulatory clarity and certainty. This certainty is essential if companies are to invest and innovate with confidence.

BT has agreed in principle to offer undertakings to Ofcom. The detail of the proposed undertakings will be published on 30 June 2005. These include a timetable for key elements of the settlement’s implementation. The undertakings, which are due to be finalised over the next few days - prior to formal consultation by Ofcom - will ensure every player has confidence in the settlement and so help usher in a new era of clearly defined regulation. This will see regulation focused on key areas and rolled back elsewhere.

BT chairman Sir Christopher Bland said today: “This has been a tough journey but it is important that we have regulation that encourages investment and innovation. The proposed settlement strikes the right balance and every player will benefit from the certainty and clarity it provides.”

BT chief executive Ben Verwaayen added: “This has been a meticulous process during which BT has engaged in depth with Ofcom and the industry. We came up with bold proposals in February that reflected the reality of the market and we have now committed to a framework to ensure others have confidence in the settlement.

“It is time to draw a line under twenty years of micro-regulation and to welcome a new era where regulation is focused where needed and rolled back elsewhere.”

BT submitted proposals in February that have now formed the basis of this proposed settlement. Central to these is the creation of a new business unit within BT to provide transparent and equal access to the nationwide local network. This unit – currently known as Access Services - will be highly regulated and its performance monitored and reported on by an Equality of Access Board (EAB). This Board will have a majority of independent external members appointed in consultation with Ofcom. Carl Symon, one of BT’s independent non-executive directors, is the chairman designate of the Board.

A team at BT, under Steve Robertson - chief executive designate of Access Services - has been developing these proposals through discussions with Ofcom and industry, and has now provided far more detail on the new unit and how it would operate.

The unit will have its own headquarters, distinct brand and around 30,000 staff. It will remain an important part of BT and operate according to clear and agreed guidelines. Its performance will be monitored against key targets by the EAB. The unit can be established within months, enabling regulation to be rolled back rapidly in other areas where appropriate.

BT has also demonstrated its continued commitment to local loop unbundling (LLU) and wholesale line rental (WLR). In order to further stimulate the LLU market, BT is to cut the rental price for its fully unbundled local loop product from £105 per annum to £80 with effect from August 1, 2005. It has also agreed to a request from Ofcom that the rental prices for IPStream and Datastream[1] - the most popular wholesale ADSL products currently used by service providers - will not fall until there are 1.5m unbundled lines in the UK[2].

This move will provide LLU operators and service providers with greater certainty for their investment plans. BT has provided additional clarity by confirming the connection charges for the existing range of IPStream and Datastream ADSL products will fall by £10 from September 1, 2005.

WLR operators are also set to benefit from greater margins for consumer line rental. BT is to cut the monthly price other operators pay by 50 pence per line from August 1 2005 before raising the amount its own retail arm charges (including VAT) by 50 pence later in the financial year. The price other operators pay for WLR will decrease further next year giving an overall margin increase of more than 10 per cent[3].

Finally, BT has been working with Ofcom to ensure there is Equivalence of Input for critical products and services which BT recognises is crucial for industry. This will ensure all operators have access to the same products, prices and processes. BT has agreed a series of dates for the implementation of these changes and incentives will be put in place to ensure BT delivers the changes against these dates. BT is committed to making Equivalence of Input work.

The structure of BT in Northern Ireland will not be affected.

BT Group plc