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Last Updated: Wednesday, 28 April, 2004, 14:53 GMT 15:53 UK
Ofcom looks into BT break-up
Rivals argue that a break-up would spell cheaper phone bills
Telecoms giant BT Group could be split in two as a result of the biggest review of the industry in 13 years.

Media-to-telecoms regulator Ofcom said the break-up of BT was one of several "what if" scenarios it was pondering.

While BT is against such a move, a number of its competitors have long called for such action.

Rivals have accused it in the past of anti-competitive practices and many have called for the separation of its retail arm from its wholesale division.

Rivals bite

BT Group still dominates the UK's home-phone market with a market share of over 70%, but crippled by debt, it was forced to launch an emergency cash call in 2001.

This was followed by the sacking of top management, the sale of foreign assets and the spinning-off of its mobile phone unit.

Now its rivals are calling for more of BT's blood.

Those in favour of the complete separation of BT Wholesale from BT Retail say it would reduce regulation, and give rival companies easier access to customers, resulting in wider choice and cheaper phone bills.

Their claim is that BT Retail currently gets an unfair advantage.

No other nation has contemplated the break-up of a former incumbent and the arguments against such a move are well rehearsed
Ofcom said its strategic review of the telecoms sector "will examine all the major questions emerging from the sector in the future".

It added: "However, we will not draw any conclusions from the review until we have more evidence from research and the views of all stakeholders until later in the year."

Radical times

BT said it welcomed the review and agreed to work with Ofcom, but it also vowed to meet any break-up threat head-on.

"No other nation has contemplated the break-up of a former incumbent and the arguments against such a move are well rehearsed," the company said. "The economy benefits from a strong, vibrant and competitive BT."

Telecoms expert Christian Maher reckons Ofcom's review is likely to be radical.

"We have speculated since the review was commenced at the turn of this year that a split of BT was on the agenda," he said.

Analysts said Ofcom's statement was expected.

"It doesn't clear the air, it just creates more uncertainty with regard to BT until December, because that's the one thing everybody is going to talk about."

Broadband levy slashed

One change that is already taking effect is an overhaul of the prices BT charges rival broadband operators.

Following an Ofcom enquiry, BT is lowering the amount it levies on other firms to switch customers between broadband networks by 78% from 1 May.

Ofcom ruled "migration charges" were an obstacle to fair competition.

This means rival operators like Tiscali and Thus will now pay only 11 to BT for each new broadband customer they sign from rival firms.

Broadband service providers welcomed the announcement but said further reforms were needed, including cheaper activation fees, to make the market more flexible.

"We would hope that Ofcom will now look at the activation fee, which is still far too high at 50," said Mary Turner, chief executive of Tiscali UK.

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