Business View: Grass grows over my old cable - and under BT's feet

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The Independent Online

My front garden needs a bit of tending at the moment. But the weeds do serve a purpose. They obscure the horrible green plastic tube that runs up one side, carrying the redundant cable laid by Telewest when we moved in six years ago. At the time, we were so cheesed off with BT we were willing to subscribe for cable. But Telewest managed to do the impossible - provide an even worse service. So after a year or so we went back to BT.

My front garden needs a bit of tending at the moment. But the weeds do serve a purpose. They obscure the horrible green plastic tube that runs up one side, carrying the redundant cable laid by Telewest when we moved in six years ago. At the time, we were so cheesed off with BT we were willing to subscribe for cable. But Telewest managed to do the impossible - provide an even worse service. So after a year or so we went back to BT.

Before you think this is an irritating testimony from a BT advert, I'd better point out that I ditched BT for one of the cheap call companies last year. Now, instead of paying £10 or so for calls each month, I get a bill so triflingly small, it almost costs more to post it to me. Unfortunately, I am still forced to pay line rental to BT, which is many times as much.

Hopefully, thanks to Ofcom, this will be a thing of the past. Mention local loop unbundling in your local, and you'll get a lot of blank stares. But tell people that at last, they will be free of having to deal with BT, then they might buy you a pint.

Despite two decades of private ownership, BT still gives off the aura of a state monopoly. It is bureaucratic and a bully. It believes it has the divine right to be your telecoms provider. And with three quarters of the market in its pocket, it seems that the consumers agree.

Last week BT dodged the bullet. The deal with Ofcom loosens its grip on the "last mile" of cabling to your front door, supposedly giving freedom to the millions of reluctant BT customers, and allowing faster, smarter telcos to compete with BT Retail on a level playing field. This allowed BT to avoid being broken up. Ben Verwaayen, the company's chief executive, celebrated. But he should have been cursing his luck.

The best thing that could have happened to BT would have been for it to be broken up. Look at how Centrica and BG thrived when the old British Gas was broken up (albeit by choice, not by regulators). Zeneca (now AstraZeneca) never looked back when it was decoupled from ICI. The break-up of the telecoms monopoly in the US brought faster, leaner companies (though not smarter ones, as the subsequent WorldCom scandal showed).

Breaking BT into Wholesale (which owns the cables and sells capacity to all telcos) and Retail (which flogs you and me phone connection, broadband, etc) would make both parts better equipped to take on the challenges coming its way. The old regulatory regime, which allowed BT to sit on both sides of the deal, hampered the competition. Now they are ready to let rip.

And the dance of the dealmakers has already begun. According to which rumour you want to believe, the number two in the wholesale markets, Cable & Wireless, is either being bought or buying someone else. France Telecom was said to be the buyer - a story that received one of the world's fastest denials - while the target was said to be Energis, a story that has a grain of truth.

Francesco Ciao, C&W's thoughtful chief exec, knows that to really exploit the opportunities created by this Ofcom review, C&W needs critical mass. Being a fifth of BT's size, it does not have that. Buying Energis or Colt would make C&W merely a quarter of BT's size. Not enough, but as Tesco says, "every little helps".

The problem is price. Colt is currently valued at £900m, which isn't bad for a company that has never made a profit and has £800m of debt. At Energis, which nearly went bust a couple of years ago, the company's chairman, Archie Norman, is looking for £1bn - a price that would put £30m in his pocket. C&W thinks about £600m would be more reasonable, but that would give the former Tory MP only £13m. You can see why no deal has been done yet.

But it is only a matter of time. BT probably realised life has become tougher. But probably not by how much.

j.nisse@independent.co.uk

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