So now we know. The boardroom row at British Telecom over "local loop unbundling", which according to some accounts produced much table thumping and threats of resignation, took place in one and a half minutes during a brief sojourn in a discussion about corporate social responsibility. That's the time it took for Sir Christopher Bland, the chairman, to obey a call of nature, and since the row didn't happen at any other point in the meeting, he can only surmise that this is when it must have taken place.
The more we learn of Pierre Danon's "demands" for tens of millions of pounds for BT Retail to spend on its own unbundling equipment, the more it seems just part of a ruse to scare off competitors and to put pressure on the regulator to allow more flexibility in wholesale pricing. Yet row or no row, the issue has served to highlight anew the old debate about whether BT should stay as one company, or would be better off demerging into two.
For Ben Verwaayen, the chief executive, the idea of the backbone network shorn of its retail arm is anathema. There would be no point in BT Wholesale investing as heavily as it is in its "21st Century Network" if it couldn't rely on the revenue stream provided by BT Retail. Yet one suspects that Mr Danon, head of BT Retail, sees it the other way round. He'd prefer the freedom to invest in his own "unbundled" capital equipment, which would allow him greater pricing flexibility and margin in areas of high broadband penetration. The problem would be solved, in Mr Verwaayen's view, if the regulator were to allow Wholesale greater pricing flexibility. It might equally well be solved if the two companies were separated.
How important this debate is to BT's long-term future remains hard to gauge. Such is the pace of change in this industry, that a year or two from now we may look back and wonder what it was all about. But at this juncture it continues to look highly significant. Mr Verwaayen's main challenge is to grow his "new wave" revenues - broadband and data networking for business -- faster than his legacy revenues - mainly rental and call charges, can fall.
After a faltering start in which he missed key sales targets, he seems finally to be succeeding. Overall revenues have grown for three successive quarters now, albeit marginally. In the quarter year to 30 September, a 6 per cent fall in revenues from BT's traditional business was more than made up for by a 36 per cent surge in "new wave" revenues. BT is proving a better defender of traditional revenues than the City predicted, while its new revenues are also growing more quickly. Margins are being squeezed in the process, though BT attributes that more to one-off costs of customer acquisition than any attempt to buy market share through pricing.
So far, so good. As if to underline BT's new found self confidence, a stonking 22 per cent rise in the interim dividend has been declared to make BT one of the highest yielders in the FTSE 100.
Yet though BT as a whole has been the primary beneficiary of Britain's new love affair with broadband, its success at the retail end of the business hasn't been nearly as striking. Of the 3.3 million broadband subscribers BT services through its wholesale operation, only 1.3 million are signed on through BT Retail, with the rest accounted for by competitors. In Mr Danon's view, lack of pricing flexibility is his key competitive disadvantage, hence the argument for allowing him to spend on his own "unbundling" equipment, rather than buy the service from BT Wholesale.
Yet even if BT wins the concessions on pricing it is looking for from the regulator, it's hardly likely to make the difference between rags and riches. Broadband is being hailed as the telecom industry's salvation, but ultimately it is no more than a commodity business and becoming more competitive by the day. What matters are the services and products that can be sold through broadband, and on this front BT Retail is proving as slow as ever. Eighteen months after it gained a broadcast licence, it is still not possible to access pay-TV through BT broadband. Mr Verwaayen's half-year report reads: good progress but not yet making enough of his potential.
The government has got itself into a terrible mess over the gambling bill, which in its present form allows for a proliferation of Las Vegas style super casinos. Ministers have been completely wrong footed by the strength of media and parliamentary opposition, some of it from the most unlikely of sources, to their proposals.
Who, for instance, would have put Michael Winner with the puritans who lecture us on the iniquities of gambling. His position is instructed by his mother, who apparently blew the family fortune at the gaming tables, yet it is none the less an oddity that someone who thinks nothing of glamourising violent vigilanteism through his movies should come over all moralistic and prophylactic when it comes to gambling. The same goes for the Tories, who entirely forget their free market principles in opposing key elements of the Bill.
Still, anything that can put the Daily Mail and The Guardian in the same camp obviously has the power to transcend the political divide. The Government feels quite unable to stand up to such an unholy alliance. Yesterday ministers signalled the expected climbdown by halting the bill's passage through committee stage ahead of amendments to be tabled next Tuesday. Speculation centres on capping the number of super casinos that would be allowed. The problem with this is that it may fall foul of European competition law. Indeed, American operators who wish to set up here are already adamant it will.
The case history in this area is quite clear. In order to be lawful, restrictions imposed by national law on gambling must serve to limit betting activities in a consistent and systematic manner. Never mind that the same law is used on the Continent to ensure that not a single American-owned super casino is ever built, in this country it seems to allow only for the complete opposite - an unbridled free for all.
In any case, the imposition of an arbitrary numerical limit on regional casinos is plainly neither consistent nor systematic. The European courts have further ruled that national restrictions must not discriminate on grounds of nationality. Yet however the restrictions are constructed, they would plainly discriminate in favour of UK national operators who own existing casinos and who would thus be better positioned to operate than the interlopers.
The upshot is that it is going to be far from easy for the Department of Culture, Media and Sport to accomplish the climbdown in a manner which satisfies critics but doesn't fall foul of the European Courts. The Government should have stuck to its guns. The market for super casinos is almost certainly finite, and even assuming the Americans were silly enough to flood it, the laws of supply and demand would soon reduce the numbers to more acceptable levels. The only decent argument against a free for all is that the new breed of super casinos would come to be used as another form of tax, both by central and local government. Yet that too should prove self limiting. Still, too late now. The Daily Mail will have its way and as usual we'll end up with a messy, highly regulated and consequently poor value, fudge.
According to Italy's economy minister, Domenico Siniscalco, coordinated central bank intervention to stabilise the euro is back on the agenda. Currency intervention can prove useful in reversing a trend, but only if the trend is already approaching its natural high water mark. Massive intervention as practiced by Far Eastern central bankers can also hold back the fundamentals, but it can only be achieved without dire economic consequences when there's a massive trade surplus to finance or when, as in Japan, there's price deflation and its inflationary consequences are nothing to worry about. Otherwise it's just like spitting against the wind. I'd also be amazed if the Federal Reserve could be persuaded to play ball. I fear Mr Siniscalco may be talking out of his hat.Reuse content