BT Opens Up Access

(NYSE: BT; London: BTA) today agreed to a settlement with a key U.K. telecom regulator, clearing the way for its next-generation network plans (see BT Unveils New Access Biz and BT Welcomes Ofcom Settlement).

Following months of negotiations, the Office of Communications (Ofcom) has agreed to the creation of a new BT division, called Openreach, which will manage and operate the carrier's access network. The new division, which will be run independently from the rest of BT's operations, will kick into life early next year (see Ofcom Accepts BT Access Plans).

The deal, which requires BT's commitment to 230 separate undertakings, will result in a division that provides equal wholesale access to all service providers, including BT's own retail division, which will have to deal with Openreach under the same terms and conditions as its voice and data rivals.

The new division will have 30,000 staff, assets worth £8 billion (US$14.3 billion), annual revenues of £4 billion ($7.2 billion), and its own CEO. This represents roughly 20 percent of BT's total size, in asset terms.

Ofcom believes the setup will lead to lower prices and broader choice for consumers. Ofcom had demanded such a move as part of its review of the U.K. telecom market. If a deal had not been concluded -- and some thought such an agreement to be almost impossible for an incumbent operator -- then BT's plans for its £10 billion ($17.9 billion) 21st Century Network might have been derailed (see Government Report Cheers BT and BT Unveils 21CN Suppliers).

The new settlement had been outlined in June, but the details had to be settled by Ofcom, BT, and its wholesale customers, particularly those broadband players that rely on access to BT's local exchanges and last-mile copper connections to deliver their own services (see BT Let Off the Hook and Unbundling Heats Up in UK).

The deal is believed to be unique among former telecom monopoly players, and other national carriers had questioned whether BT was wise to agree to the settlement. However, BT's long-term plans and Ofcom's determination to shake up BT -- which had been threatened with an enforced breakup if it didn't play ball -- meant today's announced deal was the most likely outcome (see Carriers Question BT's Sanity, Ofcom Proposes New Regs, and BT Escapes Breakup – for Now).

BT's stock initially dipped on the London Stock Exchange as the news emerged, but recovered to end the day up 2 pence, nearly 1 percent, at £2.24.

In a press statement, BT's CEO Ben Verwaayen calls the settlement "a defining moment for the industry..."

BT highlighted one particular aesthetic impact of Openreach's creation: the color of its vans. "The business, as well as having a new name, will also have a dramatic new look. Its 22,000 vans are to be re-sprayed to distinguish them from the rest of the BT fleet. They will be instantly recognisable by the bright multi-coloured waves that stretch the length of each vehicle."

At least one competitor was not wowed by the fleet's new look. Francesco Ciao, CEO of archrival (NYSE: CWP), said in a prepared statement that Openreach needs to improve on reliability and performance (see C&W Reacts to BT).

Another rival was more accommodating. "The Undertakings announced today represent a significant yet pragmatic step towards creating an open and competitive market for broadband and telecoms services, and we applaud Ofcom for its work to date," noted Dave Simpson, head of regulatory affairs at , which offers a competitive broadband wholesale service (see Easynet Plans UK Expansion). "In particular, we must ensure that Local Loop Unbundling (LLU) remains at the forefront of our efforts."

BT had not returned calls for further comment as this article was published. — Ray Le Maistre, International News Editor, Light Reading