Watchdog prepared to break up BT to ensure level playing field

Ofcom will leave the door open on Thursday for a full-scale break-up of BT when it publishes the conclusions of its probe into the UK telecoms market.

Ofcom will leave the door open on Thursday for a full-scale break-up of BT when it publishes the conclusions of its probe into the UK telecoms market.

But the telecoms and media regulator is expected to say that splitting BT into a customer and a network business would be the last resort, to be implemented only if the company acted in an anti-competitive way.

The review - the most extensive since the telecoms market was deregulated 20 years ago - will establish the concept of "equivalence". This will require BT's wholesale arm to offer its retail arm exactly the same services and terms as it does to rival telecoms companies.

Companies such as Cable & Wireless and One.Tel complain bitterly that BT gives its retail arm favourable treatment and accuse the company of dragging its heels on opening up the market to competition.

David McConnell, the chairman of the UK Competitive Telecommunications Association, a lobby group, said: "Having the break-up as an option is a good thing, which could be used if BT doesn't follow the principles of equivalence."

One area of focus for Ofcom will be what is known as the local loop, the last mile of copper wire from BT's telephone exchanges to homes and offices. BT has been accused of hampering its rivals' attempts to get access to the local loop to offer broadband internet. Ofcom is expected to introduce tough new regulations on Thursday to force BT to allow freer access.

In return, BT wants Ofcom to lift regulations on some parts of its business. A BT spokesman said that the company supported the concept of equivalence. However, if Ofcom introduced tougher rules on the local loop, BT would like the regulator to remove the floor on its residential and business call charges. In particular, BT is worried that its business telecoms services to companies in urban areas is becoming uncompetitive because of the restrictions on its charges.

Another area of contention that Ofcom is expected to address is line rental. When BT residential customers switch telephone suppliers they must, in most cases, continue to pay BT line rental. Ofcom is pressing BT to open its line rental monopoly, but rival telecoms companies suspect that BT is delaying to protect its market share. BT denies this and claims that the rivals keep changing their requirements.

Ofcom is understood to want customers to be able to buy line rental from alternative telecoms suppliers by next spring.