Optical/IP Networks

Government Report Cheers BT

BT Group plc (NYSE: BT; London: BTA) appears to have won the support of an influential U.K. government committee in its bid to avoid a forced split of its wholesale and retail divisions.

In a statement Tuesday, the Trade and Industry Committee, commenting on the Strategic Review of Telecommunications being undertaken by U.K. regulator Office of Communications (Ofcom), noted: "The Committee remains unconvinced by the case for forcing BT to separate and agrees with Ofcom that pursuing genuine ‘equality of access’ is the best regulatory approach to take. Only if this proves unworkable should forcible separation be considered."

The real prospect that BT might be forced to split itself into separate companies emerged last November (see BT Escapes Breakup – for Now). Such a rupture would have serious consequences for BT's 21st Century Network plans, as BT's CEO Ben Verwaayen has stated on a number of occasions that those plans would likely be shelved if a breakup order were imposed.

But the committee's report notes that "BT’s plans for its ‘21st Century Network’ provides an opportunity for building equality of access into the network from the start." (See BT Moves Ahead With Mega Project and BT's 21CN Meets Its Skeptics.)

In the meantime, BT has been working hard to appease Ofcom, in February suggesting a series of "proposals to stimulate the UK telecoms industry and deliver faster and more exciting services to consumers and businesses."

One of those proposals is that BT will "set up an Access Services Division to provide transparent and equal access to BT’s local network," in effect ringfencing the broadband access business that buys network capacity from BT's Wholesale division in the same way as competitive carriers.

The committee's report, while influential, is not binding in any way. The report noted: "The Committee welcomes BT’s proposals for an Access Services Division and an Equality of Access Board. Whilst BT’s competitors may complain that the proposals do not go far enough, the Committee thinks that they represent a constructive engagement with Ofcom’s consultation. However, much depends on the detail if these proposals are to be successfully implemented. These details will need to be addressed in the final stage of Ofcom’s review."

The ball, then, is firmly in Ofcom's court, and the regulator is set to deliver a verdict in June at the earliest.

BT is naturally pleased by today's report. "We welcome the report, and we're pleased that the committee recognizes our proposal to Ofcom as a significant contribution," says a BT spokesman.

He adds that BT hopes this will lead to Ofcom accepting BT's proposals, but concedes there's "still a long way to go. We're engaged in meetings with Ofcom and the industry daily on how this will work, but we're optimistic... We still have to wait for Ofcom's final decision, which is due in June, though I think that timeframe could be pushed back a bit."

— Ray Le Maistre, International News Editor, Light Reading

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