Regulatory action should be taken against BT in an attempt to increase competition in the UK's broadband market, according to an influential group of MPs.
The select committee of culture, media and sport has urged Oftel, and its forthcoming replacement OFCOM, to consider separating BT's network business from the rest of the company. The network is BT's physical infrastructure -- including local exchanges and cables -- as opposed to its service-based operations, such as BTopenworld. This separation, the committee believes, might bring down broadband prices and could also provide a boost to local-loop unbundling.
The committee's advice was delivered in its Communications report, which was published on Wednesday, and echoes a widespread belief among BT's competitors who say broadband prices would be likely to fall if a third party owned BT's fixed-line network. BT isn't allowed to sell any products at a loss -- an attempt to prevent the company undercutting rivals to boost market share. Another company might not face the same financial restraints -- which might allow it to offer cheaper wholesale broadband packages.
In its report, the committee said, "We recommend that Oftel, and OFCOM when it takes over the responsibilities of Oftel in due course, should take serious note of criticisms of its effectiveness in establishing a competitive UK market for broadband and follow up with remedial action -- taking account of the proposal to require BT's network to stand on its own as a distinct business."
The committee heard evidence from many of the key players in Britain's telecoms sector, including BT, AOL UK, Cable & Wireless and Oftel.
It was Cable & Wireless that told the select committee that BT's network should be split from the rest of the company. Graham Wallace, Cable & Wireless chief executive, told the select committee that BT should be forced to split its phone lines and local exchanges, known as the local loop, into a separate organisation.
BT's new chief executive, Ben Verwaayen, is unlikely to be impressed with the suggestion that his company should be separated. Since taking over at the start of this year he has made it clear that he will not allow any more of BT's divisions to be sold off, as happened last year with the demerging of the company's mobile network operations. BT recently turned down two multi-billion pound bids for its network business.
Currently, BT's network is managed by its wholesale division. BT Wholesale sells broadband products to ISPs, including BTopenworld. It will soon begin selling a "no-frills" broadband product to BT Retail.
It is these close relationships that get BT's competitors complaining about the possibility of anti-competitive behaviour.
BT recently substantially cut the cost of its wholesale broadband products, a move that won it much praise. However, the committee warned that such price cuts could threaten local-loop unbundling -- the process by which other companies install equipment in or near BT's exchanges and sell broadband to ISPs in competition with BT.
BT is understood to be unimpressed by the select committee's comments. Having made substantial cuts in its wholesale broadband prices earlier this year, it insists that the UK's telecoms market is competitive.
"We think this argument is dated, really," a BT spokesman told ZDNet UK News. "The UK telecoms market is getting to be very competitive and we're focusing on delivering broadband, not looking to the past," he said.
The select committee, though, seems to have been more taken by the contributions of BT's rivals than the telco's own evidence.
"When BT gave evidence to us and said that the UK broadband market was highly competitive, there was a certain amount of laughing from other people in the room. BT looked a bit offended, but we rather took the view that the people laughing were in the right," said Chris Bryant, MP for Rhondda, at a press conference on Wednesday afternoon.
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