BT offers olive branch to Ofcom

BT has responded to the second stage of Ofcom's strategic review of the UK telecoms industry by promising rival operators lower wholesale prices, faster broadband services and highly regulated access to its local network.

The telco has offered the concessions in a move that aims to "form part of a regulatory settlement between BT, Ofcom and the industry".

Tony Lavender, director of telecoms research at Ovum, and Stefano Nicoletti, Ovum senior analyst, today published an analysis which praised BT for giving a lot of ground in the review process.

"We cannot recall another instance where BT has gone so far in pre-intervention," the report stated. "The big question now is whether the industry, and particularly Ofcom, feel that BT's proposals go far enough, or that they can be implemented in a way that reassures other players."

BT's move comes in response to the regulatory principles set out by Ofcom in November 2004 which set out options for the future regulation of telecoms in the UK including immediate deregulation, a split up of BT and an option dubbed 'equivalence' giving equality of access to BT and its rivals.

Under the terms of the proposed settlement BT would set up an access services division to provide the "transparent and equal access" to its local network.

The telco will also cut a range of wholesale broadband prices and introduce faster services to "reaffirm its commitment to local loop unbundling" and "increase the commercial attractiveness of wholesale line rental".

BT chief executive Ben Verwaayen said: "BT cannot deliver the regulatory framework, but we can give an absolute commitment, unanimously supported by the board and management, that we will play our part once a new regulatory settlement is agreed."

Ovum's Lavender and Nicoletti stated: "At the time we said that we didn't think splitting up BT was a good idea, and that equivalence was the way to go.

"The flavour of equivalence runs through BT's response. As a package the response appears to go a long way to address concerns Ofcom and industry have raised. But, as always, the devil will be in the detail of how BT's proposals will be implemented.

"Proposing to form an access services division could offer the transparency required by Ofcom and wholesale customers, which want greater assurance that access services would be offered on a more equal basis to BT Retail and its competitors.

"However, governance of such an organisation would be the key to its success or failure. Although the division would remain part of BT, it is proposed that it would have a separate board with independent members.

"BT has even suggested that one of those could come from Ofcom. It will require a leap of faith for some of BT's competitors to buy into this idea."

The Ovum analysis went on to speculate on whether BT could be making itself a "hostage to fortune" by proposing this idea now.

"One of the key questions is managing interconnect as infrastructure moves towards an all IP environment. This is not just a technical question: it is a key commercial issue for many of BT's competitors," said the report.

According to Ovum, the debate will run until the middle of this year when Ofcom makes its final proposals.