Breaking up is hard to do - the argument against splitting BT

A prominent telecoms analyst has spoken out against the idea of breaking up BT and other incumbent European telcos.

Julian Hewett, chief analyst at Ovum, argues that the case for a separate local loop company, handling links from exchanges to users' premises, "starts to look feeble" when analysed properly.

The break-up argument was put forward by Forrester Research two months ago and is also known to have been discussed by some MPs and Lord Currie, the first chairman of new watchdog Ofcom.

The reasoning is that a split would improve competition - especially for broadband data services - and free different units to compete without conflicts of interest.

BT, in the UK, has frowned upon any suggestion it should be broken up.

Ovum says there are several reasons why there shouldn't be a separate local loop business, which it terms 'Loopco', and a network-oriented business, or 'Netco':

- competitive carriers, who today buy wholesale DSL service from incumbents, would have to deal with two bodies, leading to further complication
- Netco would have an advantage over competitive carriers, with its network edge equipment already co-located in exchanges
- defining Loopco would be difficult, as would where Loopco begins and ends relative to Netco

Hewett says a look at Korea, which leads the world in numbers of domestic broadband connections, shows roll out is mostly based on the incumbent's local loops.

He also doubts how many governments would want to take on what he calls the "complex, time-consuming and costly" responsibility of creating Loopco.

Instead the answer, according to Ovum, is ongoing, tight regulation.