Response to Ofcom review

BT Group PLC
22 June 2004

NR0449                                                             June 22, 2004

                BT LOOKS FOR REGULATION TO ENCOURAGE INVESTMENT

BT today encouraged Ofcom to develop a more targeted regulatory regime that can
keep pace with technological change and so ensure the UK benefits from a vibrant
telecommunications industry. Central to this regime would be a clear and focused
regulation of bottlenecks and barriers to entry counterbalanced by an
accompanying relaxation of regulation at the retail and other downstream levels.
     BT's arguments are contained in its response to Ofcom's consultation on the
Strategic Review, "Investment and innovation: a competitive advantage for the
UK".
     The paper says the sector has undergone a revolution in the last decade and
argues that a new regime has to recognise those changes whilst looking ahead to
future developments such as the convergence of fixed and mobile services and the
emergence of new access technologies.
     BT says a strong telecommunications sector is central to economic growth and
that successful national economies of the 21st century will be those that
embrace new technologies. The companies behind those technologies have to have
confidence however that regulation will allow them to reap appropriate rewards
from their investments.
     A new approach is required to provide that confidence. Such an approach would
move away from micro-regulation and would focus far more on bottlenecks and
barriers to entry than on market share. It would also seek to encourage
infrastructure investment instead of relying on mandated access to networks.
     BT chief executive Ben Verwaayen said: "Ofcom's challenge is to develop a
regulatory regime that can keep pace with technology, ensure continuing
investment and encourage innovation. This would benefit consumers, businesses
and the UK economy.
     "Many markets are now extremely competitive and so there should be a relaxation
of complex regulation particularly when new services are introduced and there
are no barriers to entry. In return, BT accepts that there will need to be clear
and focused regulation where genuine economic bottlenecks occur.
     "Certainty is vital for those companies, like BT, who are looking to create the
services of the future. These are exciting times but companies have to be
confident that regulation will not eat into the rewards of their investment.
This is of particular importance given the likely entry of powerful players from
other sectors.
     "Regulation has to reflect the realities of the market. Convergence is coming
and consumers will soon make no distinction between fixed and mobile services
for their voice calls, e-mails, text messages or use of the internet. Regulation
of the fixed line market on its own is simply not relevant anymore."
     BT is one of the UK's largest capital investors with its £3bn annual investment
being more than double that for UK motorways and trunk roads. This investment
has underpinned the UK's broadband success story and BT's plans for a 21st
Century Network demonstrate the company's ambition to ensure the UK remains one
of the most dynamic communications marketplaces in the world.
     BT's full submission is available at http://www.btplc.com/responses.

Inquiries about this news release should be made to the BT Group Newsroom on its
 24-hour number: 020 7356 5369. From outside the UK dial + 44 20 7356 5369. All
  news releases can be accessed at our web site: http://www.bt.com/newscentre

About BT
BT Group plc is the listed holding company for an integrated group of businesses
providing voice and data services in the UK and overseas, particularly in Europe
, but also in the Americas and the Asia Pacific region. British
Telecommunications plc, a wholly-owned subsidiary of BT Group plc, holds
virtually all businesses and assets of the BT group.

BT is one of Europe's leading providers of telecommunications services. Its
principal activities include local, national and international
telecommunications services, higher-value broadband and internet products and
services, and IT solutions. In the UK, BT serves over 20 million business and
residential customers with more than 29 million exchange lines, as well as
providing network services to other licensed operators.

BT consists principally of three lines of business:

   • BT Retail, serving businesses and residential customers and including BT
     Openworld, one of the UK's leading ISPs.


   • BT Wholesale, providing network services and solutions within the UK,
     including ADSL, conveyance, transit, bulk delivery of private circuits,
     frame relay and ISDN connections.


   • BT Global Services, BT's managed services and solutions provider,
     serving multi-site organisations worldwide. Its core target market is the
     top 10,000 global multi-site organisations with European operations.

There are a number of other businesses within the BT group, including BT Exact,
an internationally renowned centre of excellence in IT and networking
technologies. It is also BT's technology and research and development business.

In the year ended 31 March 2004, BT's turnover was £18,519million with profit
before goodwill amortisation, exceptional items and taxation of £2,016million.

For more information, visit www.bt.com



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