Ofcom returns to the charge on BT's local loop

Within hours of forcing BT to cut its broadband migration charges, Ofcom promised to slash BT's charges for local loop connections.

And while the regulator said that it was "agnostic" on the idea of breaking up BT, analysts have said that the plan would prove too difficult and represent "challenging" technical problems.

Presenting phase 1 of the regulator's strategic review of telecoms, Ofcom chief executive Stephen Carter reportedly pre-empted at least part of phase 2 by saying that he was keen to force BT to cut its charges for 'last mile' connections.

And he pointed out that the UK was seriously lagging other countries in freeing up the net to competition. The UK has Europe's second highest connection and rental charges, with connection charges almost double the average and rentals a third higher.

BT has suggested that it may be reviewing these charges, implying that it would perform the same double-act with the regulator as it did on migration charges; where in effect Ofcom announced that it was going to do something about the charges and BT simultaneously announced that it had already cut them to the required size.

But, while Ofcom included the idea of breaking up BT into separate wholesale and retail companies, the idea is widely seen as a non-starter. Ofcom's own figures give the UK telecom market 8.5 out of 10 for competitiveness, which would hardly justify drastic action.

And while enthusiasts for break-up keep pointing at the gas and electricity markets, opponents simply say 'Railtrack'. While the idea of breaking up BT has been around for 20 years, the details have remained very fuzzy.

Julian Hewitt, Ovum chief analyst, said: "It's just too difficult. For technical reasons alone, it would be pretty challenging. And the end result would effectively be setting up a monopoly supplier of the network – it would just reinforce the dominance that BT has now.

"You could achieve the same result with a fairly vigilant regulator. It would mean a bit more work for Ofcom but it would cause less disruption and be less risky."