BT proposals for UK telecoms

BT Group PLC
03 February 2005



February 3, 2005

           BT UNVEILS PROPOSALS TO STIMULATE THE UK TELECOMS INDUSTRY

BT today unveiled a comprehensive set of proposals to stimulate the UK telecoms
industry and deliver faster and more exciting services to consumers and
businesses. The proposals, which could form part of a regulatory settlement
between BT, Ofcom and the industry, would provide all players with the
confidence they need and see red tape rolled back where appropriate. Central to
the proposals are plans by BT to offer operators lower wholesale prices, faster
broadband services and transparent, highly regulated access to BT's local
network.

The proposals form BT's response to the latest stage of the Ofcom Strategic
Review. They include:

• BT to set up an Access Services Division to provide transparent and
  equal access to BT's local network

• BT to cut a range of wholesale broadband prices and introduce faster
  services

• BT to reaffirm its commitment to LLU. BT also proposes a further price
  cut to the fully unbundled LLU product

• BT to increase the commercial attractiveness of Wholesale Line Rental

• BT to provide fair access to its 21st Century Network

As part of this proposed settlement, Ofcom would:

• Focus regulation on BT's local network through its Access Services
  Division

• Roll back other regulation on a progressive and rapid basis

• Allow successful investment in next generation networks to be properly
  rewarded

• Allow BT to compete on a level basis with other operators in the market
BT chief executive Ben Verwaayen said: "The United Kingdom has the opportunity
to create the most exciting and innovative telecoms market in the world. Ofcom
has recognised this and has initiated a Review with the aim of creating a new
regulatory framework to make this happen. BT has a critical part to play, and
today we are making a set of far-reaching proposals towards that framework."

"BT cannot deliver the regulatory framework. But we can give an absolute
commitment, unanimously supported by the BT Board and its management, that we
will play our part once a new regulatory settlement is agreed."
Central to BT's proposal is the need for regulatory certainty so that all
companies can invest and innovate with confidence. Much of this investment will
come from BT if an appropriate regulatory framework is developed. The company
has plans to invest up to £10 billion in the creation of a 21st Century Network
over the next five years, far more than any other European telco. However, these
plans, which would bring substantial benefits to the UK, are dependent upon BT
receiving assurances it can generate appropriate economic returns from its
investment.

BT is also prepared to offer the industry greater transparency by establishing
an Access Services division that would be the main focus of future regulation
and have a new approach to governance. This "fenced off" part of the business
would remain within BT and would have responsibility for ensuring equal access
to the services and assets associated with the local loop, the copper wires that
run between telephone exchanges and households. An Equality of Access Board,
with two independent members chosen in consultation with Ofcom, would oversee
its operations.

This division would be able to demonstrate that every operator is treated
equally and so allow regulation to be rapidly rolled back in other areas. This
would greatly simplify the complex mesh of regulation that has built up over
twenty years and provide all companies with the confidence they need to make
their long-term investment plans.

As announced separately (News Release DC05 - 058), BT has today announced plans
to deliver much faster wholesale broadband services as well as price cuts to
many wholesale broadband access products. These include cuts to the full local
loop unbundling product subject to the speedy and satisfactory conclusion of two
parallel Ofcom consultations and the wider review as well as following normal
regulatory processes.

These changes and price cuts will enable service providers and other operators
to sell competitive services in all parts of the UK, both urban and rural. This
is critical if the UK is to have a thriving marketplace in which companies can
choose from a variety of routes to market and are not forced to adopt one
particular model.

BT is also committed to making Wholesale Line Rental (WLR) a success and so it
is also offering to increase the margins for companies using this product. WLR
is the product that other companies use in order to sell voice services to
customers on one bill.
                      -----------------------------------

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 is one of the world's leading providers of communications solutions serving
customers in Europe, the Americas and Asia Pacific. Its principal activities
include IT and networking services, local, national and international
telecommunications services, and higher-value broadband and internet products
and services.

BT consists principally of three lines of business:

   • BT Retail, providing fixed and mobile communications services and
    solutions and IT and networking services to more than 20 million business
    and residential customers in the UK. It is also a leading UK internet
    services provider.

   • BT Wholesale, providing network services and solutions within the UK to
    more than 600 fixed and mobile operators and service providers including the
    provision of broadband, private circuits.

   • BT Global Services, providing IT and networking services internationally
    to meet the needs of multi-site organisations with European operations. BT
    Global Services operates in more than 130 countries and also offers
    international carrier services.

In the year ended 31 March 2004, BT Group's turnover was £18,519 million with
profit before goodwill amortisation, exceptional items and taxation of £2,013
million.

BT Group plc is listed on stock exchanges in London and New York. British
Telecommunications plc (BT) is a wholly-owned subsidiary of BT Group and
encompasses virtually all businesses and assets of the BT Group.
For more information, visit www.bt.com/aboutbt




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