It's time for BT to ring the changes

THIS week we could see the beginning of the end of a debate that has hindered the development of an entire sector of British industry for more than two decades.

That sector is telecoms - and the debate is about how the sector should be regulated to nurture a vibrant, competitive market.

The regulator, Ofcom, has been engaged in a review with key players in the industry for almost 18 months now and we should see some conclusions shortly.

At the heart of the debate is a simple question - how should access to BT's monopoly network be regulated to ensure that competitors are not unfairly disadvantaged?

The answer to this question will have a major impact on the number of players in the market, the amount of innovation, the returns that investors will see and the prices that consumers pay.

This is critical to the competitiveness of the UK economy given the increasing impact of communications technology in all areas of business.

Ofcom's review got off to a good start. It identified the need to alleviate the 'bottlenecks' restricting access to BT's network - caused both by the nature of operations and the company's behaviour - and it outlined possible remedies.

We are now waiting to hear whether BT is going to be forced to deliver remedies - or whether the only option is for Ofcom to refer the matter to the Competition Commission.

Utility aficionados may be wondering why BT is not being forced to separate its monopoly network from its retail operations. That was the chosen remedy in energy markets and it delivered more rapid competitive development in five years than we have seen in telecoms in 20.

The answer is that BT has come up with the idea that by creating a whole new division to their business, to be called the Access Services Division, the industry and Ofcom will no longer feel that BT's retail business has unfair advantage.

In common with the leaders of most, if not all, of BT's competitors, I believe that BT's original proposals to create a new division did not go far enough. The proposals lacked detail and were vague about how the ASD would work with the rest of the company.

Ofcom and BT have been working on these proposals for some months and we hope some progress has been made. We need confidence that the ASD will treat all players - including BT Retail - on the same terms.

We need commitments that the management of the ASD will be free to work in the interests of the industry and not just BT's. To work, the behaviour of the ASD's employees will need to be markedly different to that which many of us have grown accustomed to receiving from BT over many years.

This brings me to the matter of equivalence - the core principle of Ofcom's proposals is equivalence at a product level. It means that all players should have access to the same basic wholesale products at the same prices, using the same systems and processes and on the same contractual terms.

WHAT does this mean for the customer? Equivalence will ensure that all telecoms providers have the same starting point and customers can make informed choices based on the value added benefits that different providers can offer.

Until BT has delivered equivalence, Ofcom needs to reflect this in the charges other operators pay BT to minimise the commercial gap. The current lack of equivalence damages the industry and hence customer choice.

If competitors are unclear what they can expect from BT and, as is the case today, face higher costs for inferior service, then ultimately they will not invest in the UK market. Ofcom will never have a better opportunity. BT wants reduced regulatory interference. It also wants to invest in upgrading its network.

If chief executive Stephen Carter and his team at Ofcom can use the carrot of reduced regulation to achieve real hard commitments to change from BT's management, then everyone - including the company's shareholders - should ultimately be better off.