(Rewrites, adds detail.)
By Simon Zekaria and Ian Walker
LONDON--The U.K.'s communications regulator Thursday mulled
whether telecommunications incumbent BT Group PLC (BT.A.LN) should
be separated from its infrastructure division Openreach on
competition grounds, amid a rising fight among operators for
Internet subscribers in the country's rapidly-developing sector for
media services.
The Office of Communications, or Ofcom, announced the completion
of the first phase of its digital communications review, where a
major focus has been on whether there is sufficient competition
benefits to consumers and businesses.
"BT's network has evolved in recent years, with fiber lines
running closer to premises. This may require different models of
competition than those that worked best for the traditional copper
telecom network," Ofcom said.
It believes U.K. consumers would get better services at lower
prices if there is a sufficient number of effective competitors.
The review also considers the implications for the U.K. of
international trends toward consolidation.
Ofcom is seeking views on the review and evidence on future
regulatory approaches by Oct. 8.
Matters under consideration also include whether new rules
should be applied to BT, such as controls on its wholesale charges
with stronger incentives to improve quality of service, or tougher
penalties if BT falls short.
It will also examine converging media services, offered over
different platforms, or as a 'bundle' by the same operator. For
example, telecom services are increasingly sold to consumers in the
form of bundles, sometimes with broadcasting content; which can
offer consumer benefits, but may also present risks to
competition.
"We welcome this review and are confident it will find the U.K.
broadband market to be both vibrant and healthy. There has been
huge progress this past ten years with an explosion in competition
and broadband usage," said a BT spokesman.
"Much of that progress is down to BT investing billions of
pounds in fiber at the height of the recession," added the
spokesman, saying that spend depends on BT remaining intact.
Pay-television giant Sky PLC (SKY.LN) squared off with its
rival.
"It is welcome news that Ofcom is putting the future of
Openreach at the centre of its review. For too long, consumers and
businesses have been suffering because the existing structure does
not deliver the innovation, competition and quality of service that
they need," said a spokesman for Sky.
Sky has called on the Competition and Markets Authority, the
antitrust regulator, to launch an inquiry into the matter.
At 0747 GMT, shares in BT fell 0.1% to 469 pence. Sky shares
rose 0.7%. to 1,133 pence. Still, analysts at Ovum said Ofcom's
document suggests it will conclude a full separation of BT from
Openreach would be disproportionate.
The review comes as operators battle for subscribers in an
intensified media services fight as they bundle together fixed
telephony, mobile, broadband Internet and pay-TV. BT has spent on a
range of sports channels to develop its TV service and also moved
to acquire mobile operator EE in a multi-billion dollar deal, which
has raised the stakes in the industry.
"The one area where consumers are getting a raw deal is pay-TV,"
said a BT spokesman, in a comment against Sky, which is the largest
pay-TV operator in the country by number of subscribers.
Write to Simon Zekaria at simon.zekaria@wsj.com and Ian Walker
at ian.walker@wsj.com
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