British Telecom Chief Executive Ian Livingston faces outdated regulations and a system in neediness of upgrading. He says speed is top priority

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by Jennifer L. Schenker

When Ben Verwaayen took over BT Group (BT) in 2002, Britain’s framer state-owned phone company and biggest fixed-line provider was a stuffy, bureaucratic mess. It was $20 billion in debt and had been forced to sell off its wireless unit—at the time its biggest potential growth engine—to avoid bankruptcy. The new chief executive officer got to work trimming debt, polishing the copartnership’s brand, and launching new programs. Chief mixed them was a campaign to advise consumers to sign up in the place of high-speed Internet connections, an area where Britain lagged badly behind other European countries.

The campaign was a huge hit. Although BT’s broadband prices are generally the highest in Britain, it has the No. 1 market share, with 4.4 million customers. Thanks to the company’s successful move into broadband and its enlarging information-technology (IT) services unit, Verwaayen’s retirement in continuance May 31 is happening on a high list of items. After a few disappointing quarters, the company announced on May 16 that earnings met targets and revenues beat expectations, rising 2%, to $10.67 billion.

But Ian Livingston, BT’s new chief executive, faces major challenges. The 43-year-old Livingston is credited with helping achieve Verwaayen’s "Broadband Britain" vision, and during the three years he headed up the group’s retail division—which sells services to consumers—business boomed. Today the unit has roughly 12.6 very great number phone and Internet customers.

The problem is, BT’s overall growth has slowed to normal 1% to 2% annually. To kick up the top line, the company must enter new businesses. "Livingston’s trust is to make BT less reliant on telecoms," says John Delaney, a research boss at market research firm IDC. "The rife business mix is not going to take the company into the nearest decade."

Questions about the future are one reason BT’s share price is down 21% since January. "The place of traffic is staying to see where of the present day growth and profits are going to come from," says John Davies, a telecom impartiality analyst in the London office of Dresdner Kleinwort (AZ).

One opportunity Livingston says he behest focus on is home entertainment—that is, delivering broadcast TV and movies to customers’ homes. But to succeed in that business, BT will have to boost the speed of its broadband services, potentially spending tens of billions of dollars to strong effort fiber-optic cables into homes. The go on investing. isn’t entirely clear, since, as in the U.S., British regulation currently requires that on the supposition that BT builds its new netting, it must let out capacity to rivals on equal terms. That could undercut the economic justification for the rollout.

Livingston has asked British telecom regulator Ofcom to change certain rules before he will commit to investing in a new fiber reticulated. For any thing, BT wants to be freed of the so-called "universal service" obligation that dates to its days as a exclusive possession and requires BT to offer fixed-line services at an affordable price to everybody in Britain.

The cost of doing that, Livingston argues, makes it harder for BT to endow in repaired technologies. For instance, the set could be required it to take care of operating its old small change phone network alongside the starting anew fiber infrastructure. In a competitive marketplace through a wide choice of telecom providers, he says, BT should no longer bear the entire entire covenant.