BT's new chief Ian Livingston throws down gauntlet to Ofcom

Sunday, April 13, 2008

THE new BT chief executive, Ian Livingston, is challenging the telecoms regulator Ofcom to make sweeping changes to his company’s universal service obligation (USO) before he will commit to investing billions of pounds in a new fibre-optic network.

He wants firmer assurances from Ofcom chief executive Ed Richards that BT will not be left with soaring running costs and thinner profits if it installs fibre optics designed to carry a growing volume of television programmes and data to homes.

"We will not spend material amounts of money that will guarantee that we lose money for shareholders," said Livingston, who takes over from Ben Verwaayen in June. "It's just not going to happen."

The key definition of its obligation – rooted in BT's history as a state-owned telecoms monopoly – is that it must offer a fixed-line service at an affordable price for anyone in Britain who wants one.

Livingston argues that this needs amending if it is to divert cash into more sophisticated services and move away from its legacy of copper wires.

"We want changes to the USO to reflect a fibre world," he said. "There are 200-odd service providers. Why should all the USO fall on BT Retail?"

BT's key concern is that it is not forced to continue maintaining its old copper network when new fibre infrastructure has been built, hence doubling its operating costs.

It also wants assurances that it will not become liable to pay compensation to rival operators such as Carphone Warehouse, which have spent millions installing their own equipment in telephone exchanges to control the "last mile" running into the home.

The government wants BT to commit to an upgrade of the broadband network that could cost as much as £15 billion to keep up with connection speeds of 100 Megabits per second being deployed in France and Germany.

BT is testing the water by installing high-speed fibre optics at a new-build scheme in Ebbsfleet, Kent.

The upgrade issue was back in the spotlight last week when rival internet providers moaned that the runaway success of BBC's iPlayer catchup service was clogging up the network. Britain’s average broadband speed is currently 4.6Mb per second.

BT has been campaigning for other parts of its USO to be reduced or ended. In particular, it sees little point in maintaining 24,000 payphones that consistently fail to make money because of the popularity of mobile phones.

"We have got the hurt and the restrictions of the legacy," said Livingston. "Some of the restrictions have been removed. Ofcom has been a bold organisation because it would be easier not to change things.

"But we still have got to move on. Things that were rigid in the past world have to be changed for the future."

In 2006, Ofcom estimated that the cost to BT of the USO was between £52m and £74m a year.

This article was featured on The Times Online.

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