British Telecom – looped around a rock and a hard place

2000-01-25

At last – the local loop looks like it is to be opened up to competition. A set of draft guidelines, published \link{http://www.oftel.gov.uk/competition/llu30300.htm,here}, were released by Oftel on Friday which set out the requirement for BT to open up competition to its “last mile” by June next year. 2001 could be a good year for telecommunications users in the UK, but maybe not such a good year for BT.

Essentially, this boils down to one of the few remaining areas in which BT can be said to hold a real monopoly. This is the wire between the local exchange and the end-user socket on the wall: the socket, the wire and the exchange are all currently owned, managed and charged for by BT. Plans to change this have been in train for some time, but a timetable has not been forthcoming. Not, that is, until now.

The effects of this change will be far-reaching. According to the Register, which very kindly summarised the main points of the guidelines (which, let’s face it, wouldn’t win top prize in a clear English competition):

“Among the conditions announced … is BT's requirement to provide unbundled loops to other network operators, to permit the co-location of equipment at its local exchanges, and to provide any necessary services to open up the network to competition. It will also give Oftel the power to set the price for these services.”

Given the current challenges that BT is facing, from quarters such as free ISPs and government announcements about reducing telephone charges still further, this is one extra problem that BT could really do without. Inevitable it may be, but pleasant it is not. What is worse, the companies lining up to threaten BT’s monopoly position (from telcos like AT&T, cable providers such as NTL and ISPs like Alta Vista) are, in general, global players with few restrictions on what they can and can’t do. BT still faces a number of restrictions on its own practices: it is still unable to deploy cable services and, according to Oftel, is facing increasing pressure from the international calls market.

BT expressed fears about being bought following its recent share price falls – this may be the best bet for a company that is seeing its monopoly replaced by a regulatory framework which may leave it unable to compete. BT has been slow to move in the past, and its privatisation needed such a framework, but the world has moved on. The June 2001 date marks the end of an era for BT; it should also mark the beginning, with the company free to compete against some of the world’s largest communications companies. Even if its bonds are broken, these are battles which the company is not guaranteed to win.

(First published 25 January 2000)