The Sunday Times reports:

“The chief executive of BT Group has warned that 60% of British homes and businesses will be denied the benefits of the broadband revolution unless Ofcom, the industry regulator, changes its approach.

BT�s Ben Verwaayen said Ofcom�s method of encouraging more competition in high-speed internet services � known as local loop unbundling or LLU � would not work outside large urban centres.

LLU allows rival companies to install their own equipment in BT�s local exchanges, enabling them to provide faster and more sophisticated services than BT itself supplies.

However, Verwaayen said LLU was too costly to make it economical outside the top 600 exchanges, which cover about 40% of the population.”

Comment: There is some truth in these comments. Surely, once you put in place a regulatory based service model such as LLU you are creating a market that will only ever invest at the areas of greatest potential profitability. Even if companies decide to enable exchanges outside areas of significant demographic density prices are likely to be significant higher or service levels lower, due to a lack of competition.

However, it’s also worth remembering that there’s a lot of postering and positioning going on at the moment between BT and Ofcom in advance of the final recommendations of the Strategic Review. Both know that they can’t acheive what the other wants without some compromise.

In addition, Verwaayen’s comments also suggest that BT is beginning to feel the pressure of real competition in urban areas in regard to broadband.