"Defining moment" as BT split finalised

Stuart Corner
Sunday, 25 September 2005 13:23

IT Industry - Strategy

Operational separation of the UK's former monopoly telco, BT is now close to completion with the regulator, Ofcom accepting BT's proposals for the setting up a separate access business.

BT says it will have its new access division, BT openreach, up and running by January 2006. It will be responsible for the 'first mile' of wire that connects homes and businesses to BT exchanges across the UK. BT promises that it will "ensure all service providers have transparent and equal access to the nationwide local BT network".

BT CEO, Ben Verwaayen, hailed the development as "a defining moment for the industry" saying: "it offers a fresh start and means that companies will be able to focus entirely on their customers without being distracted by micro-regulation. It provides everyone with greater certainty and clarity. That, in turn, will release investment and innovation from which everyone will benefit."

The new division will have 30,000 staff, assets worth £8 billion, annual revenues of £4 billion and its own CEO. It will be the second largest division of BT and control about 20 percent of its assets.

Ofcom says it believes the creation of openreach will lead to lower prices and broader choice for consumers. It had demanded such a move as part of its review of the UK telecom market.

If a deal had not been concluded. Ofcom had threatened to break up BT, a move which could have derailed its ambitious multibillion dollar next generation network project, 21CN.

openreach will have its performance monitored by the newly created Equality of Access Board (EAB). Carl Symon, one of BT's non-executive directors, will chair the board which will have a majority of independent external members.

BT's main competitor, Cable & Wireless gave the news grudging acceptance. CEO, Francesco Caio, said: "The undertakings that Ofcom has won and the new division BT has had to create demonstrate the effect its monopoly control of access has had in undermining competition to date. Together, they present an opportunity to drive real change but there is still a difficult journey ahead.

"BT's service to its competitors remains inadequate...Openreach must improve dramatically on BT's performance in consistent and reliable, right first time, delivery of local loop unbundling...Today's undertakings and the new division must deliver, monitor and sustain a real change in behaviour to achieve consistently improving performance."