“We believe these proposals have the potential to encourage more
sustainable competition, more services, lower prices and greater
consumer choice,” said David Currie, Chairman of the communications
regulator.
The announcement comes at the end of a year-long review of the
industry, during which Ofcom put forward possible outcomes for BT,
which reportedly controls 62% of the market.
Ofcom considered referring BT to the Competition Commission – a
referral that could have forced the division of BT into a retail
company and a wholesale company. But it preferred an alternative
approach: a new regulatory system based on equivalence and
transparency, where BT Retail would be required to use the same
products, processes and prices as its rivals. This plan also
involved structural changes within BT, ensuring that those selling
access to the network would treat BT and its rivals the same.
In February, BT put forward proposals in line with Ofcom's
regulatory suggestion, and today agreed in principle to offer
undertakings to Ofcom on this basis.
The undertakings
The detailed undertakings will be published on 30th June – when
they and supporting documents will be put out for consultation.
They will be legally binding and enforceable, meaning that if they
are ever breached by BT, Ofcom will be able to take the matter to
the High Court, while third parties will be entitled to go to court
to seek damages for any losses incurred.
In general terms, the undertakings provide for the creation of a
new business unit within BT to provide transparent and equal access
to the nationwide local network.
This unit – currently known as Access Services – will be highly
regulated and its performance monitored and reported on by an
Equality of Access Board (EAB). This Board will have a majority of
independent external members appointed in consultation with
Ofcom.
The unit will have its own headquarters, distinct brand and
around 30,000 staff who, while they will remain employees of BT
Group, will have separate bonus schemes to reflect the objectives
of Access Services, rather than BT Group.
In addition, Access Services will be required to support all
providers’ retail activities on a precisely equivalent basis –
known as equivalence of input – and to offer the same types of
products and services to all operators.
“The Ofcom Board proposes to accept BT Group plc’s proposed
undertakings on the critical assumption that BT Group plc does not
merely deliver the letter of the undertakings, but also the
spirit,” said Ofcom Chief Executive, Stephen Carter.
BT chairman Sir Christopher Bland added, “This has been a tough
journey but it is important that we have regulation that encourages
investment and innovation. The proposed settlement strikes the
right balance and every player will benefit from the certainty and
clarity it provides.”
BT has also announced some price changes today, revealing that
the rental price for its fully unbundled local loop product will be
cut from £105 per annum to £80 with effect from 1st August. It has
also agreed to a request from Ofcom that the rental prices for
IPStream and Datastream – the most popular wholesale ADSL products
currently used by service providers – will not fall until there are
1.5 million unbundled lines in the UK.
Connection charges for the existing range of IPStream and
Datastream ADSL products will fall by £10 from 1st September.
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