BT has unveiled its response to UK national regulator Ofcom's November 2004 'Strategic Review of Telecommunications'. Headlining this is a proposal to set up an Access Services Division to provide better and enlarged access to BT's local network for competitive service providers. The suggestion is that the new division would be the main focus of future telecoms regulation activity in the UK, and also have a new approach to governance. This fenced-off part of the telco's business would remain within BT, and would have responsibility for delivering equal and transparent access to the services and assets associated with the local loop. An Equality of Access Board, with two independent members chosen in consultation with Ofcom, would oversee its operations. The plan/BT hope is that the proposed division would be able to demonstrate that every operator was treated equally, with the quid pro quo that regulation applying to BT would be rapidly rolled back in other areas.

Other sweetners in the suggested BT package were that the telco would cut a range of wholesale broadband prices and introduce faster services, get more serious about local loop unbundling (LLU), increase the commercial attractiveness of wholesale line rental, and provide fair access to its forthcoming 21st Century Network.

Too little, too slow
Ofcom's 2004 review was prompted both by a recognition that the UK's existing telecoms regulatory regime was probably out of step with the realities of the contemporary marketplace and that, even after 20 years of competition, the former monopoly service provider still dominated the national fixed line telephony market. To address the above Ofcom saw the three options as:

• Full deregulation. This would mean removing the existing mesh of UK regulation entirely and relying instead on ex post competition law to resolve complaints. Given BT's continued market power, Ofcom considered this to be unlikely to encourage the growth of greater competition and, as such, would not serve the best interests of the consumer.
  

• Enterprise Act investigation. Ofcom could investigate the market under the Enterprise Act 2002, with the potential for a subsequent referral to the Competition Commission.
  

• BT to deliver real equality of access. Ofcom could require BT to allow its competitors to gain genuinely equal access to its networks. This option would also require BT to commit to behavioural and organisational changes to ensure that its competitors benefited from access to products and processes that were truly equivalent to those offered to BT's own retail businesses.

Head 'em off at the pass?
(Possibly with some reluctance) BT has thrown its considerable bulk behind the third course of action as the path of least pain. Will it wash? "All in all the overriding impression of the package is that BT has given a lot of ground at this stage of the review process. In fact we cannot recall another instance where BT has gone so far pre-intervention", consider Tony Lavender, director of Telecoms Research, and Stefano Nicoletti, senior analyst, at the UK's Ovum consultancy. "The big question now is whether the industry and particularly Ofcom feel BT's proposals go far enough. Or that they can be implemented in a way that reassures other players. This debate will run until the middle of this year when Ofcom makes its final proposals. Now the real negotiation begins".

"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", adds Ovum. "Proposing to form an Access Services Division could offer the transparency required by Ofcom and wholesale customers, who 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".
John Williamson