BT shrugs off latest break-up speculation

BT has rubbished the latest calls for it to be broken up to ensure it cannot dominate Broadband Britain through its ownership of the UK's local telephone network.

Think-tank Demos published a report on Monday that claimed that putting the "local loop" - the last stretch of phone lines running into homes - into the hands of a public-interest company would encourage improvements to the network. It urges the government to launch a review into the risks and rewards of such a move.

The report, called The Politics of Bandwidth, was sponsored by Cable & Wireless, which has repeatedly called for BT's wholesale arm to be split from its retail operations.

According to BT, a break-up isn't on the agenda as it isn't in the best interests of either BT or the UK.

A spokesman said: "This report is sponsored by Cable and Wireless. The fact they are making another call for BT's separation is about as surprising as dead leaves falling to the ground in autumn."

Back in February, Cable & Wireless told a parliamentary select committee that Britain would never have a truly competitive and successful broadband market as long as BT owns the UK's local telephone exchanges.

Lord Currie, the head of Ofcom, wrote a report earlier this year that said that "careful consideration" should be given to separating BT. However, Ben Verwaayen, BT's chief executive, told journalists in September that he wasn't worried that Ofcom - which replaces Oftel in 2003 or 2004 - might consider such a move.

"The idea of splitting BT is a dead horse that doesn't bring the benefits that some people think it brings," Verwaayen insisted.

According to Demos, though, by letting BT dominate the wholesale ADSL market the UK runs the risk of languishing in the "second division" of digital economies.

James Wilsdon, co-author of The Politics of Bandwidth, said in a statement: "The UK is sleepwalking towards a broadband monopoly, with little opportunity or incentive for innovation within the network."

Demos also recommended that Ofcom should force BT to "place its own broadband retail operations on an equal footing with competitors".

BT Retail offers a "no-frills" broadband package for £28 per month that doesn't include services such as email and web hosting.

Freeserve complained to Oftel about BT Broadband last month. It claims that the product will cost UK consumers £100m over five years because retail broadband prices will fall slower in the UK if BT dominates the market.

Graeme Wearden writes for ZDNet UK