The Ofcom chief executive has had to tread a fine line between BT and the many bitter rivals who want its market power curtailed, its wholesale prices cut, its processes improved or its business broken up. For two decades its intransigence and its skill at dealing with Carter’s predecessors at Oftel have bred a culture of complaint and suspicion in the industry.
Yet with Ofcom’s new regulatory regime unveiled on Thursday, Carter seemed to pull off a remarkable feat. The proposals were welcomed both by BT and, in large measure, by its toughest critics, including John Pluthero of Energis and Francesco Caio of Cable & Wireless. “This is encouraging progress,” said Caio. “BT has finally been brought to heel.”
The new regime is intended to strengthen competition, lower prices and stimulate investment in new services. Broadband internet is likely to be one of the first areas to benefit.
Carter said BT’s rivals would have a direct incentive to invest in their own network equipment: “There will be increased competition, more brands capable of offering full ownership of lines into people’s homes. There will be faster roll-out of faster broadband.”
BT has committed itself to moving 30,000 staff into a newly branded and separately located company, which will be charged with providing rivals with “equivalent” access to its network. Competitors will be able to rely on the same products at the same prices, delivered using the same processes, as those available to BT Retail, which continues to supply 70% of British homes.
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BT has given 50 pages of legally binding undertakings, and agreed to financial penalties if it fails to deliver. Ultimately, Ofcom could take BT to the High Court for failing to treat its smaller rivals fairly — a sanction Carter expects to be used rarely.
Ben Verwaayen, BT’s chief executive, said: “It was tough for me to go to the board and say, ‘these are all the things we need to do.’ We looked very hard to make sure it’s not just five minutes of glory and five years of regret.
“It is good for the industry, for investors and for the regulators. If you say everybody wins, that raises high suspicion, but I have a hard time trying to argue that this is not good news.”
For BT, the advantage is an end to uncertainty (Ofcom’s strategic review began in April last year) and to the threat of an imposed break-up. It can also look forward to regulation being rolled back in areas where it no longer has significant market power. Its shares jumped 4% on Thursday.
The industry has still to see the detail of BT’s undertakings, but the new regulatory deal looks likely to be a personal triumph for Carter. Unlike most regulators, he is held in high esteem by most of those he regulates. At 41, the former
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J Walter Thompson and NTL boss is younger, wealthier (he made £1.7m on leaving NTL) and more ambitious than most regulators.
Ofcom’s deal with BT was built on a strong personal relationship between him and Verwaayen. Carter said: “We would not be where we are today without BT’s constructive engagement, and Ben Verwaayen’s leadership of it. That leadership has been integral. Ben has not got a history of being a 35-year BT lifer. It’s not irrelevant that he’s not British — he has an instinctively broader view.”
Carter rejects any suggestion that he has let BT off the hook by allowing the company to retain ownership of the access-services division.
He said: “We have come up with a regulatory framework which is radically different, which has real bite, which lowers prices, which will dramatically increase broadband take-up, which creates certainty for investment and does that without a major meltdown in the market.”
Ian Watt of Enders Analysis agreed that the proposals look tough: “Ofcom has plugged a lot of the loopholes we were expecting BT to exploit and have wriggle room.”
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Ian El-Mokadem, managing director of Onetel, which has 1.5m retail customers, said: “We are very pleased with the access-services division structure. The overall environment is definitely encouraging.”