BT is to be investigated by the European Commission over whether it has obstructed the process of local loop unbundling in a bid to protect its share price.

The comments of European Competition Commissioner Mario Monti (see below) certainly back up Oftel's willingness to engage BT. But Monti's complaint that the pace of change is "by no means satisfactory" and his desire to avoid a "de facto monopolistic regime" indicate that the EC doubts Oftel's authority.

One of the EC's prime objections is that BT has sought to stall broadband rollouts by other companies, thus delaying broadband access itself. The irony is that the Commission's insistence that stimulating competition was the best way to deliver has inadvertently delayed it.

"There are contradictory pressures at work," said Tim Johnson, principal analyst at Ovum. "The UK needs ADSL, but at the same time there must be a level playing field for other operators. BT could have rolled out ADSL faster had Oftel not insisted that a wholesale offering be in place first."

Bulldog Communications welcomed the EC probe. Vincent Pickering, legal expert at the company, used to work at the Commission. "The EC does not have the same national policy interests. It is unburdened by national prejudices and the relationships that inevitably develop at a national level," he said.

While there is disagreement about how best to promote broadband to UK businesses, Pickering said it was a moot point. "You could take the view that having a monopoly is the best way to spread broadband, but the EC has taken the view that competition law is the best way, and that law is the biggest weapon the EC has," he explained.

There have been many complaints from rivals, but commercial companies will by nature fight their own corner, right or wrong. If Oftel was to ensure BT could offer unbundled loops as efficiently to rivals as it does to its own divisions there would be no problem. "There has been perceived discrimination, and there have been many complaints that Oftel has dismissed," said Pickering.

Meanwhile, network managers are waiting patiently for faster access while their counterparts in the US and Europe forge ahead. Johnson said the best solution to the unbundling problem was suggested by BT itself. Sir Peter Bonfield set out plans for a company called Netco, which would control BT's infrastructure and force BT's retail divisions to buy lines from it on the same basis as any other operator.

Netco is now officially on the back burner. Infrastructure management is split between Ignite, which oversees backbone management, and BT Wholesale, which controls local infrastructure.

A BT spokesman confirmed that no work will take place on Netco until the controversial demerger of BT Wireless is complete. Johnson said that the interim arrangement of Ignite and Wholesale is a move towards decentralising infrastructure from services which, from a regulatory point of view, is probably the best target.

But there are others eyeing the potential of the local loop which, as Johnson pointed out, is not being used in a way that maximises its value.

Financial consortium Earthlease recently made a bid to buy the local loop outright, and effectively become an independent infrastructure management body.

"The Earthlease bid has pointed out the value of the local loop," said Johnson. "If another company owned the loop, it would certainly unlock the situation. But arguably the best solution for BT, its shareholders and customers is to do that itself, much like the Netco suggestion."

If an EC investigation finds that BT has fallen foul of competition laws, it could face a fine of £2bn. Confidence in the national telecoms regulator will have been undermined, and BT's share price could plunge again. Progress on ADSL coverage could be threatened too. Competition may be the aim, but so far it seems no one is winning.

The full Monti on local loop unbundling

Mario Monti, European competition commissioner, commenting on local loop unbundling throughout Europe: "Competition is essential because we do not want the development of the information society to take place under a de facto monopolistic regime.

"The pace of progress in opening the local loop is by no means satisfactory, and the incentives for new entrants to provide services over the local loop are currently low.

"In spite of active supervision by national regulatory agencies, telecom incumbents are delaying as much as they can the delivery of unbundled lines, which is extremely slow, or proposing non-competitive access conditions and procedures.

"This is of real concern because they are at the same time taking advantage of their control of the local loop to roll out their new ADSL broadband services."