MPs flirt with BT break-up

Despite the recent surge in the take-up of broadband in Britain, BT is still being forced to defend itself against calls for the company to be broken up. Members of the Parliamentary Joint Committee on the draft Communications Bill, which met on Monday evening, blamed BT for the fact that the UK is still behind other countries when it comes to the take-up of high-speed Internet services. The joint committee -- which is made up of six MPs and six members of the House of Lords -- also asked several of BT's rivals whether they would support the company's break-up. Several members of the joint committee are understood to be rather attracted to the idea of splitting BT in two -- a cause that Cable & Wireless has been pushing for quite some time. Baroness Cohen of Pimlico told Ben Verwaayen, BT's chief executive, that the telco had taken too long to offer broadband at a low enough price to make it popular with consumers. "Is it not the case that broadband in the UK has been delayed because BT was unwilling to let people have it at a sufficiently low wholesale price?" demanded Baroness Cohen. "Wasn't that a failure of regulation?" Baroness Cohen asked, suggesting that OFCOM, which will replace Oftel once the Communications Bill becomes law, should be given strong powers. Verwaayen rejected the allegation that BT had acted improperly over broadband, and insisted that it was doing more than its rivals in driving the cause of Broadband Britain. He said there were two reasons why broadband take-up in the UK was different from in other countries: the availability of narrow-band unmetered access Internet products, and the regulations that BT had to deal with. "The FRIACO product gave people always-on Internet access at a very affordable price, but the other reason was pricing -- which is a no-win situation for BT. Companies complain that BT's prices must be kept high else they can't compete, but the same people then say that they can't compete unless BT lowers its prices," Verwaayen claimed. BT has often blamed FRIACO for slowing the take-up of broadband, but AOL has publicly dismissed the claim in the past. Since joining BT at the start of the year, Verwaayen has made broadband one of his top priorities, as was seen when the company slashed the wholesale price of its ADSL products in April this year. Breaking up is hard to do
Verwaayen also tried to persuade the committee that splitting BT's network operations from its retail side wasn't a blindingly bright idea. "This isn't the water industry, where there's just one product which is all one colour and only has one taste," said Verwaayen, illustrating the relative complexity of telecommunications. "If you separate the network from the product you're risking a nightmare situation," he added, defending the vertical integration so resented by many of BT's rivals. The problem facing BT, though, is that there seems to be quite a bit of support for the idea of breaking it up, even though broadband take-up is now growing rapidly. The legacy of all the mud thrown at the UK's incumbent telco by companies such as AOL, Cable & Wireless, ntl and Telewest is that some influential politicians believe that BT did act badly with regard to broadband, and they don't want to give it the chance to do it again. The select committee of Culture, Media and Sport, which produced a report into the Communications Bill last month, recommended that OFCOM should consider taking regulatory action against BT. The Rivals
Before it went head-to-head with Verwaayen, the joint committee into the Communications Bill heard evidence from some other telecommunications companies -- and asked them where they stood on the issue of breaking up BT. Telewest and ntl were reluctant to "put the ball in the back of the net" -- as one committee member put it -- and restricted themselves to demanding that OFCOM would come to its decisions rather faster than Oftel has managed. Cable & Wireless, though, were more vocal. "There needs to be a thorough, independent, evaluation of whether the UK's telecoms market is competitive. We think it isn't, and believe that the market would be much better off if BT's network was broken away from BT Retail," said Tom Philips of Cable & Wireless. The company said pretty much the same thing to the Culture, Media and Sport select committee when it appeared before them. Cable & Wireless are understood to believe they are winning support for their argument within political circles, but a BT insider was scathing about this, claiming that Cable & Wireless have made their claim so many times that they've managed to persuade themselves that they have won some support.

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