U.K. regulator dismisses call to break up BT

The U.K. national telecommunication regulator, the Office of Telecommunications (Oftel), on Wednesday rejected the idea of breaking up British Telecommunications PLC to promote competition in the U.K. broadband market.

Oftel believes that it has sufficient regulatory powers and is moving BT in the right direction when it comes to opening up the broadband market. The breakup of BT is "not on its current agenda," the government department said in a statement.

Last May, the Select Committee on Culture, Media and Sport published a Parliamentary report urging the regulator to consider separating BT's network and retail businesses as a way to create more competition in the broadband market.

After conducting its own review of broadband offerings in the U.K., Oftel found that competition is increasing, "with prices now cheaper than in France or Germany." By the end of July, there will be 750,000 broadband connections in the U.K., Oftel estimated.

BT is currently receiving about 12,000 orders for broadband service per week, with 280,000 end users currently receiving broadband service from the company, BT's Chief Executive Officer (CEO) Ben Verwaayen said in a speech made Wednesday to shareholders at BT's first annual general meeting, which was also released as a statement.

The reprieve from possible government action is in contrast to other former European telecommunication incumbents, such as Deutsche Telekom AG (DT) and France Telecom SA. On Tuesday, the German government forced Ron Sommer to resign as DT's CEO due in part to the company's massive debt load. France Telecom's similarly considerable debt is also putting its CEO, Michel Bon's future in doubt and the French government is doing nothing to dispel rumors that it may move to renationalize France Telecom. Various studies have found that despite regulation and the threat of litigation by the European Commission (EC), broadband Internet adoption has been slow across Europe. Last week, five of Europe's large telecommunication companies -- including Cable and Wireless PLC (C&W) of London, Arcor AG & Co. of Eschborn, Germany and Groupe Cégétel SA of Velizy, France -- wrote to the European Commissioner for Competition, Mario Monti, complaining about "methodological anti-competitive behavior" by former telecommunication monopolies in the market for local telecommunication services in Europe. BT has been repeatedly criticized by Oftel for attempting to undercut competitors that were offering broadband through BT's wholesale services or through collocation sites where the local loop, or "last mile," has been or is being unbundled. BT's competitors in turn have been critical of Oftel for not taking a hard enough line with BT and strictly enforcing competition regulation.

BT has always strenuously denied it has ever moved to stifle competition. Verwaayen in February stressed that, on the contrary, broadband is the key to BT's future and promised to drive growth across the entire market by cutting the price of wholesale broadband connections in the U.K. by 40 percent in an effort to stimulate the growth of "Broadband Britain."

But by last month, Oftel was again pushing BT to further open up the broadband market by forcing the company to offer operators a broadband connection to its fixed line network. Around the same time, Bulldog Communications Ltd., once one of BT's staunchest critics, said it was making progress in its ability of offer broadband services and announced an agreement to supply BT wholesale markets with symmetric DSL (Digital Subscriber Line) services over the unbundled local loop.

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