FT’s Lex Offers Some Sense Amongst The BT ‘Breakup’ Media Mayhem,

“Breaking up BT - that old chestnut - has received another roasting in recent weeks. To its credit, Ofcom seems little more inclined than its predecessors to split BT’s fixed-line network from its retail activities.

The regulator notes that such plans have repeatedly been rejected since 1984 and asks whether even the question of a stricter operational separation is still relevant.

The answer is: probably not. Britain’s telephony market is highly contestable, not least because of aggressive price competition from mobile. A case may yet emerge to separate BT’s internet activities from the rest, as broadband telephony matures. But because of Britain’s relatively high cable penetration, that case will always be weaker than in much of the rest of Europe.

More generally, depriving BT of some operational synergies would level the playing field at the cost of efficiency. The relationship between the retailing business and networks would continue to require careful supervision to avoid implicit bulk discounts.

Ofcom could also be forced to micromanage investments in the network. Experience from the railways hardly suggests that a monopoly supplier of infrastructure will gladly invest in costly upgrades. BT has a mixed record in spotting future customer demands, but it is hard to see Ofcom doing much better. Overall, a split would probably achieve the miraculous feat of delivering lower returns for BT shareholders, higher prices for customers and deteriorating network infrastructure.”