Ofcom warns BT over new rule changes

Stephen Carter, the chief executive of Ofcom, the telecoms regulator, warned there was no room for manoeuvre yesterday over the behavioural and structural changes it is demanding from BT Group and that it will not allow the company to recreate a monopoly over the country's telecommunications network.

Mr Carter was reacting to comments made by Ben Verwaayen, the chief executive of BT, on Monday that the telecoms group might resist Ofcom's demand for changes if they undermined its competitiveness.

The alternative to BT accepting Ofcom's demands for improved access to its network for rivals, so-called equivalence, is a referral to the Competition Commission and the threat of a possible break-up.

Mr Carter said: "There's a lot of room for discussion. I'm not sure I would describe it as room for manoeuvre. I don't at this stage, and I never have thought, that it's constructive to characterise it as a conflict or a contest. We've had 20-odd years of it working one way, we're trying to suggest it could work another way.

"My own view, and this is one I think shared by many people, and I would include BT in that, is that this requires substantial change in some areas and I think we can make that work. Like everything, the genie is in the detail and right now we're working on that detail."

BT's chairman, Sir Christopher Bland, has also recently warned that the company's planned £10bn investment in a "21st-century network" could be imperilled by price controls imposed on it by Ofcom.

Mr Carter, who was speaking to The Independent alongside Lord Currie of Marylebone, Ofcom's chairman, said: "The legitimate question for the regulator and the legitimate question for the regulated [to ask] is 'if we're going to make this investment, given that we are and we do have significant market power in a whole bunch of areas, how much of that investment are we allowed to retain as profit within our own organisation and how much do we have to pass on in terms of the way the regulator's charges work?'

"There is clearly room for discussion. What we are saying is that we are keen to incentivise future investment but we don't want to incentivise future investment solely for BT to create an extant monopoly matching the old one. We want to create 21st-century networks plural, not 21st-century network singular."

Sir Christopher has called for a level playing field in the charges and costs governing different technologies that are used to supply broadband internet connections. BT has complained that Ofcom's existing price controls make it difficult for it to compete against rivals.

Mr Carter said yesterday that discussions regarding these charges had not yet been completed but admitted that BT's stance on its proposed regulatory regime was understandable. "If I was BT I would be saying what they are saying now. It's part of an argument."

Lord Currie held out the prospect of a compromise on the subject of equivalence that would allow BT's rivals proper access to BT's wholesale network in exchange for a lighter regulatory regime imposed by Ofcom. Lord Currie said: "It's our job to make sure we have an effectively competitive telecoms sector. What we've had in the past is a regulator getting deeper and deeper in to the detail of BT's business.

"The mutual interest we have is of us getting BT to put in place a self-regulatory equality of access that allows us to withdraw, which is good for them because it leaves them less encumbered and good for the rest of the industry because they have real equality of access. Getting that to work is the trick."