Energis turns its back on £140m broadband launch

Energis, the telecoms company chaired by Archie Norman, has axed plans to spend £140m rolling out broadband internet through BT's telephone wires, branding it a waste of money.

Energis, the telecoms company chaired by Archie Norman, has axed plans to spend £140m rolling out broadband internet through BT's telephone wires, branding it a waste of money.

The news is a big blow to Ofcom, the telecoms and media regulator, which wants to promote competition in the broadband market by opening up BT's local telephone exchanges.

But the process, called local loop unbundling, "is uneconomic for national rollout", according to John Pluthero, chief executive of Energis. "It involves a significant upfront investment with no apparent return in any realistic time frame. Frankly, we have got better things to do with our cash."

The news will further fuel the heated debate on how best to roll out broadband in Britain. BT is embroiled in an internal row over whether to allow its consumer arm, BT Retail, to use the local loop to offer broadband. At present it isn't, but the boss of Retail, Pierre Danon, has complained that as a result he is unable to compete on price with companies such as Wanadoo. However, BT's chief executive, Ben Verwaayen, is concerned about the upfront cost of Retail using the local loop.

On Thursday, BT will publish its interim results and Mr Verwaayen is expected to reveal that one solution under consideration is to cut the price at which it sells wholesale broadband services to other companies. As Retail is also a BT Wholesale customer, it would be able to reduce its prices to consumers.

However, this would first require approval from Ofcom. The regulator may take a dim view of the idea, as it would make local loop unbundling less attractive to BT rivals.

Ofcom is expected to give a hint on whether it will allow the price reduction on 18 November, when it is due to publish the conclusions of its review into the telecoms market. BT's rivals claim the debate highlights the problems within BT. Ian El-Mokadem, managing director of One.Tel, said: "There is a fundamental conflict with running a retail and an infrastructure business. Sooner or later, BT will have to address this."