Ofcom has admitted that BT is still failing to give its retail rivals fair and equal access to its telecommunications network, and threatened the telco with a full legal investigation.
In a damning indictment of the performance of the former telecoms regulator, Ofcom said on Thursday that competition in the UK telecommunications market is "fragile", despite two full decades of regulatory intervention.
Ofcom is proposing that BT changes its existing mechanisms and processes to give its competitors the same access to its wholesale network, at the same price, as BT's own retail arm.
If BT doesn't play ball, Ofcom will launch an investigation under the Enterprise Act, which could result in the Competition Commission getting involved.
BT has argued in the past that it provides a level playing field -- but many rivals have disputed this claim.
"Twenty years after liberalisation, the market has made good progress. However, its foundations are unstable in parts, overly dependent on intrusive regulation and with limited sustainable competition," said Ofcom chief executive Stephen Carter.
Carter's comments were delivered in the phase two proposals of Ofcom's Strategic Review of Telecommunications , which was published on Thursday morning.
This review is a major investigation into the UK telecoms market. It has concluded that the market is flawed in two ways -- its structure is "unstable" and dominated by BT, and 20 years of regulation have resulted in a "complex regulatory mesh".
BT said on Thursday that it would welcome a move away from the "micro regulation" that Ofcom has identified as being bad for consumers.
"We believe the 'new regulatory contract' which Ofcom describes has the potential to encourage investment and innovation," said a BT spokesman.