Devil's Advocate: Breaking BT

What is the best way to get the best from BT? Before you all rush to post a Reader Comment, ask yourself if the Martin Brampton's railway analogy really works...

The way Spitting Image put it, if BT is privatised already, then we must privatise it again. With the new chairman of all-powerful Ofcom musing about a break-up of BT, that is more or less what is in prospect. But before we delight in putting one over on the telco, we ought to consider some parallels.

There are good and bad examples of ways to break up monolithic industries. One that seems to offer an incentive for multiplicity is the insurance industry. Much insurance is sold not by insurance companies but by independent brokers. At first sight, it might looks as though the consumer could get a better deal by going directly to the insurer, thus avoiding the middleman. Yet, often this is not so.

For one, there is no guarantee insurers can set up direct sales operations that are as efficient as those run by the good brokers. The situation is further complicated by the fact that brokers often represent many different insurers, linking the customer with the insurer who offers the most favourable rate for the particular risk.

The telephone business is not much like insurance, though. An alarming parallel is with the railways. Might a break-up of BT leave us with the telecommunications equivalent of Railtrack owning the core network? The future of such a scheme is extremely uncertain. Groups like Earthlease have tentatively promoted bids for the fixed network, although BT has always spurned them.

The outcome of a separation of the core network from other activities is doubtful. The proponents of such a scheme have been adamant that the network could be far better exploited if it were separated from the rest of BT. Against that, it would remain a monopoly facility and the history of Railtrack suggests that, in private hands, long-term investment is sacrificed in favour of short-term profits. One of the greatest strengths of BT has been its engineering skill, something that could easily be dissipated in a Railtrack-like environment.

Indeed, to some extent the situation is already moving towards a split. There are now many providers offering communications but they frequently depend on the BT network for the actual provision of services. BT is probably perfectly happy to have someone else selling services, knowing that it will still automatically pick up the core part of the business.

In a way, the doctrinaire insistence on making everything commercial is beginning to look dated. World, and especially US, trends still favour hands-off government. But the issues facing vital public utilities are now not radically different from those that existed just after the Second World War when the original round of nationalisation took place. Effective national policies were needed, combined with high standards of delivery. Vital assets such as the national grid resulted.

Monopoly provision is simply a natural part of fundamental networks such as the railways or the telecommunications system. Indeed, attempts to rival the BT network with alternatives, such as Energis' use of facilities belonging to electricity distribution have largely led to financial ruin. How can that be a basis for confidence in a future where BT is broken up into genuinely competing units?

Perhaps renationalisation is too bitter a pill for New Labour to swallow. But if Ofcom is serious about finding a radical solution to the tardy technological progress of BT, it needs to look carefully at the construction of a communications equivalent of the Strategic Rail Authority. That body is busy establishing standards to which the various railway operating companies must adhere.

Some are calling it creeping nationalisation. But most are welcoming it as the way to make the railway system work properly. We don't want to turn BT into another Railtrack, do we?

** Martin Brampton is a director and founder of Black Sheep Research (www.black-sheep-research.co.uk ), an independent consultancy providing research, writing and speaking services on a wide range of business and technology subjects. Martin was previously a director at Bloor Research, and has worked with IT as a user and analyst for over 20 years. He has been a frequent contributor to silicon.com's Behind the Headlines TV programme and can be contacted at silicon@black-sheep-research.co.uk .