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April 26, 2004

BT faces prospect of breakup

BT Group Plc, the former telecoms incumbent in the UK, is facing a possible breakup of its wholesale and retail divisions, under proposals under consideration by Ofcom, the UK sector watchdog.

By CBR Staff Writer

According to the Financial Times, Ofcom has asked Peter Ingram, its chief technology officer and former head of technology at BT Retail, to examine the pros and cons of splitting BT into at least two separate units.

One scheme being considered is that BT’s network division BT Wholesale would be separated from BT Retail. This would mean that only the last mile connection to UK households would then be subject to regulation.

Those in favor 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, something BT denies.

Ofcom has said breaking up the former monopoly into separate retail and wholesale businesses was just one of a very large number of what-if? scenarios to inform its thinking about the future direction of the sector.

There are many options that we can now think internally across every single aspect of telecoms, said an Ofcom spokesperson, adding that these are hypothetical and discursive.

The privatization of the UK’s telecoms industry was thought to be one of the greater successes of the program of state sell-offs initiated by Margaret Thatcher’s government in the 1980s. Customers no longer wait three months for the installation of a phone line, and average bills have plummeted amid increased competition.

Yet BT has continued to face repeated charges of abusing its market dominance. To be fair, this seems to be mostly a case of sour grapes from competitors, as BT is no longer the force it once was.

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BT no longer has a credible mobile phone business, after selling off mmO2 Plc. It is struggling with declining fixed-line revenues and increased fixed-line competition. It is also facing competition from over 200 broadband providers.

This article is based on material originally published by ComputerWire

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