Analysis: Oftel proposals will kickstart competition

BT finally faces the prospect of having to let other operators into its sacred local copper loop following Oftel's decision yesterday. "We're disappointed. We don't think Option 2 (which proposes other operators muscle into BT's local exchanges) is necessary," said a BT spokesperson.

"I'm not surprised BT is concerned," said Roger Tuckett, principal analyst at Ovum. "But", he added. "It's a significant step. The UK is moving away from pure infrastructure competition to services competition and the consumer," he said.

But analysts have been asking why one UK-bred giant has had 85 percent of the local phone market stitched up for so long? Across the pond, monopoly-smashing is a national sport. "BT has been moving too slowly, particularly in rolling out Asymmetric Digital Subscriber Line (ADSL) technology. The UK is in danger of falling behind. The consensus is that unbundling the local loop should be mandated," Tuckett said. It is in Germany, Denmark, Austria, Finland and the Netherlands.

Oftel denies it's been dragging its feet? "Working out what is a very difficult policy decision in an industry where there are strong feelings... We need to get it right," said Peter Walker, Oftel's director of technology.

Oftel's move was inevitable -- "Unbundling has achieved critical mass from the regulator's point of view. It's likely to be the norm across Europe," Tuckett points out -- but there are fears that the timetable for change is too ambitious.

BT warned the roll out of its generation data networks are seriously threatened by the new proposals. Letting rivals upgrade the network with their own kit will incur "significant costs", warned BT. "There's a risk it will divert investment from the Option 4 environment (BT-driven network upgrade). All our engineers will absorbed in the other stage," said the BT spokesman.

"Who pays?" He asked. It's a good question: BT, rival operators, the customer? "It's not been decided yet," admitted Oftel's Walker. "It's one of the many issues we have to address," he added.

It may have been a taxing policy decision for BT's watchdog, but Oftel believes paving the way for high-speed services in July 2001 is not beyond the wit of man. "It's possible. We've mapped out a very detailed scheme," Walker said.

BT is not convinced. "Co-location (having someone else's kit in your precious exchange) poses all sorts of threats from security to the more mundane issues like who has access," the BT spokesman said.

He has a point. With a dozen operators flogging services from one exchange, there'll be fundamental management issues. Also, interference from rival traffic clashing is another potential problem not to mention security issues. BT is fretting about who physically accesses its hallowed copper vaults but should the customer? The telecoms behemoth thinks so.

"Confidentiality could be compromised. Where 5 or 6 operators are sharing sensitive information, there's room for error. There are very serious issues here," he stressed. And on the subject of customers, BT added, "Who do you complain to when something goes wrong?"

Ovum's Tuckett believes that with sufficient industry co-operation and commitment, "any problems can be overcome within two years".

While Oftel does have the power to enforce license changes if BT misbehaves, it would be churlish for BT to resist the changes. It is in everyone's interest to get high-speed networks off the ground. The City certainly approved of the past few days events, hence BT's small share price hike Tuesday.

If the industry gets it right, healthier competition will nurture sleeker, cheaper services. Operators will be able to offset investments from services and UK users, domestic and business, can finally escape the communications dark ages.