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BT plans revamp in bid to appease rivals and Ofcom

BT GROUP is planning a radical overhaul of its business as part of a regulatory settlement between the former state monopoly and its industry rivals.

BT's plan, which includes the creation of a new operating division fenced off from the rest of the group, involves the promise of charging lower prices to its wholesale customers and a quadrupling of broadband internet speeds

However, competitors, including Cable & Wireless (C&W), yesterday called on Ofcom, the industry regulator, to toughen sanctions against BT, including the imposition of fines of more than Û100m (pounds 70m) in line with other European regulators for future transgressions.

Francesco Caio, the chief executive of C&W, said: "I think a tougher trainer gets a fitter player," pointing to fines levied of more than Û200m against some continental telecoms firms.

BT, and its rival C&W, were yesterday detailing their final responses to the Strategic Review of Telecommunications being conducted by Ofcom, the industry watchdog, which wants to implement a more effective regulatory regime for telecoms companies.

BT's new Access Services operating division will employ 26,000 staff and manage revenues of pounds 3bn. It will run the group's local access network - the crucial copper wire connections between BT exchanges and households and businesses. The group, whose chairman is Sir Christopher Bland, said it would cut the costs to other telecoms providers of connecting to this network - so-called local loop unbundling - while creating an Equal Access Board with outside directors, possibly including representatives of Ofcom and rival companies, to police the new division's work.

BT demanded that as part of its proposed settlement Ofcom should "roll back" regulation in other markets including business and residential voice services, wholesale broadband services and the operation of its planned pounds 10bn core network.

But BT's rivals jumped on the notion that BT should enjoy wider deregulation if it agreed to closer policing of its local network operations. Mr Caio said BT had enjoyed 20 years of light regulation and it should now deliver cheaper products and more transparent working methods. "I think they've had a huge carrot. They've had carrots, potatoes and aubergines and it's a very nice meal indeed," he said.

Apart from its new local network operating division, BT's main proposals are: to cut wholesale broadband prices on services using its main network by up to 8 per cent and by a "similar" amount on broadband using its local network; to increase the commercial attractiveness of its wholesale, line rental product - a service where customers of rival suppliers no longer pay a separate line rental bill to BT; and to provide "fair" access to its new core network.

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