OUT LOOK: British Telecom

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The Independent Online
HAS BRITISH Telecom done enough to stave off the threat of enforced break-up? BT's chief executive, Ben Verwaayen, is replacing a history of reluctant incremental change with what he bills as bold and radical action by creating a separate and transparent entity to manage the local loop. By so doing he hopes to deliver to Ofcom and rivals many of the benefits of structural separation without any of the negatives he thinks it would imply for BT and its shareholders. As a quid pro quo, he also hopes to persuade the regulator to give up more than 20 years of micro- regulation, allowing BT finally to start acting and investing like a proper company, able to reap the rewards of its innovations and risk taking initiatives.

First impressions were almost universally favourable. In a number of respects, BT's proposals went even further than the set of remedies coincidentally demanded by one of the company's main competitors, Cable & Wireless, which admitted to being gobsmacked at how far BT had moved. Even the regulator, Ofcom, welcomed the plan, though its chief executive, Stephen Carter rightly pointed out that the devil would be in the detail.

Yet what's proposed does genuinely seem to be more than just cosmetic. Short of break-up, this seems as far as BT can reasonably go in attempting to guarantee equivalent access to its networks for rivals. I can think of no obvious parallel for having both a competitor and a representative of the regulator sitting there on the board of the local loop company to ensure fair treatment for all.

The wider question is whether these arrangements will help ensure the rapid, low cost roll-out of broadband Britain so desperately needs if it is to remain competitive. Britain's market-driven approach to broadband should ultimately prove a more productive one than that being applied in dirigiste France and Germany, which is more centrally directed. But to work it requires open and fair access to BT's networks for all, especially in BT's virtual monopoly of the last mile.

Mr Verwaayen has always argued that the cost and disruption of break- up would far outweigh any benefit. And even if there were no such cost, it would still be a bad idea as BT Wholesale couldn't undertake the sort of investment needed in the network without the guarantee of business supplied by Retail. Retail provides the anchor which makes the company function. He seems to be winning the argument. Let's just hope he's being as bold as he claims with yesterday's proposals. A cynic would think of them as just another stalling tactic, for that has been BT's history. The regulator will need to be sure they amount to a lot more.