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BT dodges break-up bullet

Ofcom is trusting that a new access services division will bring more competition to UK telecoms

BT and Ofcom have agreed to sweeping changes to the way rival telecoms operators access BT's UK telecommunications network.

Under the changes, which will be published in full by the end of the month, BT will set up a new access division that will, it says, ensure that its rivals get fair access to its local telephone exchanges.

Ofcom is confident that this will finally mean a level playing field between BT Retail and other Internet service providers and telephone operators. There have been widespread complaints over recent years that Retail has been unfairly favoured by BT.

BT is also cutting the cost of installing equipment in its exchanges -- a process known as local-loop unbundling (LLU). LLU allows other operators to offer telecoms products in competition with BT.

Ofcom's announcement follows its Strategic Telecommunications Review, launched last year. If Ofcom and BT had failed to reach agreement, then the regulator could have started the process of breaking the telco up. This option now looks to be off the agenda, but Ofcom has warned that this is an option if BT fails to come through on its promises.

The telecoms industry was still digesting the implications of Ofcom's announcement on Thursday morning, with one insider describing Ofcom's announcement as "a step in the right direction" towards fair access to BT's network.

In return for making concessions in the way it operates its 'local loop', BT will get more freedom to invest in 'high-risk' ventures such as its 21st Century Network. This is something BT has urged Ofcom to allow. However, other operators are concerned that the construction of 21CN could give BT a more dominant position in the UK market.

Ofcom said on Thursday it is still working on measures to make sure 21CN will offer "all providers the same products, prices and processes on equal terms and does not inhibit reasonable developments by alternative network operators".