BT break-up on the cards? Ofcom to examine splitting BT's network from its retail business

Spin-off 'could deliver competitive or wider benefits for end users'

A discussion paper from telecoms regulator Ofcom has suggested that BT should be split in two, separating its networking business from its retail business. The move would create competitive and other benefits for end users, the regulator has suggested.

It comes as Ofcom completes the first stage of its review, which it started in March.

BT Openreach, the company's networking business, is already supposed to run at an "arm's length" from BT's retail business - the part that services business and consumer customers.

BT Openreach has an obligation to treat all customers impartially, whether they come from the BT retail side or BT-owned Plusnet, or from Sky, TalkTalk or any other telecoms and internet service provider that needs to use, or have access to, BT's own network and facilities.

However, rivals have consistently complained that BT Openreach is inefficient and does not install broadband or new lines quickly enough. It is also slow to fix faults, they say.

Ofcom said that a fully separated Openreach business "would remove BT's underlying incentive to discriminate against competitors".

It continued: "Separation could also offer ways to simplify existing regulation. However, the process would be challenging and it may not address some concerns relating to Openreach - such as service quality, or the timing and level of investment decisions."

The process is currently at the discussion stage, with Ofcom inviting submissions from interested parties. However, a formal spin-off is just one of a number of options that Ofcom is examining, with any proposal also requiring political backing. It will also take into account investment in communications infrastructure, it added - a consideration that could tip the balance either way.

While critics have argued that BT has been too slow to roll out fibre and other high-speed broadband infrastructure, the UK as a whole does not compare too badly on international comparisons.

As part of the review, BT has also requested the right to switch off its old-style circuit-switched voice-calling network, which is protected by law. BT claims that the traffic could be easily carried over its packet-based "21st Century Network", but critics argue that doing so would make it susceptible to power cuts and network outages, compared to the robustly reliable circuit-switched voice network.

Other parts of Ofcom's wide-ranging review includes proposals to regulate the mobile sector less tightly.