Watchdog may call for BT break-up

Ofcom has asked its chief technology officer Peter Ingram to evaluate separating BT's network infrastructure from its retail section to reduce regulation of the sector and increase competition.

Rivals must currently rely on BT's co-operation to deliver their services.

Competitors such as Centrica Telecoms have sought the break-up of BT after struggling to gain part of its 70 per cent share of the fixed-line market.

One of the complaints being made by rivals has been that BT Retail - the operation that deals with customers - is treated favourably by the network division of BT Wholesale.

Dividing the company into two units could release BT Retail from formal regulation by Ofcom, reports said.

Ofcom launched a wide-ranging review of the telecoms sector in December, pledging to look at whether privatisation has delivered the goals of lower prices and wider choice.

A BT spokesman said: "We are disappointed and in other ways we are surprised, because it has been looked at before and has not convinced people this is a sensible way forward."

The idea that BT Retail would be freed from regulation by Ofcom was doubtful because of its dominant position in the fixed-line market, he said.

The spokesman said no dialogue had taken place with Ofcom about a potential division of operations, but BT would be commenting on the strategic review in the next few days.

In a statement, Ofcom said it was looking at possible changes to the telecoms sector, but such discussions were hypothetical at this stage.

"We have said consistently that our strategic review of telecommunications will examine all the major questions emerging from the sector in the future," Ofcom said.

"However, we will not draw any conclusions from the review until we have more evidence from research and the views of all stakeholders until later in the year.''

Ofcom is due to publish the initial findings of its review tomorrow.