Deregulation of British Telecommunications

The Deregulation of British Telecommunications

Deregulation is the elimination or removal of government controls and restrictions in, for instance, a particular area of business with the aim of encouraging more competition. Deregulation in the telecommunication industry has ensured that there is a public policy that:

  1. Guarantees provision of quality service
  2. Allows for reasonable setting of prices
  3. Ensures the availability of advanced infrastructure

According to a survey done in the UK, there was an overwhelming feeling by many respondents that competition forces should determine the nature of the telecommunication industry instead of regulatory measures. Competition, ideally, spurs innovation which brings about new ideas and ways of doing things. Competition also allows prices do be determined naturally by the forces of demand and supply. The development of telecommunications market in UK has brought forth many new changes. The rise of BT (British Telecom), the first telecommunication company in UK, brought with it some issues worth to note in as far as deregulation is concerned. They include:

  1. The UK telecommunication market was the first market to benefit from deregulation measures in the 1980s. It was an area where ‘price cap regulation’ of commodities was first introduced in the UK
  2. British Telecom was the first major British telecommunications company to be deregulated and privatized in the 1980s
  3. Deregulation which brought in competition in the telecommunication industry was introduced a decade earlier when compared to many other European countries.

However, realizing meaningful competition in the telecommunication sector was a slow process for companies like British Telecom due to certain national dynamics.

Deregulation in UK

British Telecom was privatized in 1984 and it is also in this year that deregulation policies in the telecommunication industry were initiated. The 1980s saw the British government introduce a ‘duopoly policy’ in telecommunications which allowed the entrance of another market player, Mercury, into the industry. Despite this, British Telecom was still the dominant player as compared to Mercury. The UK government further allowed many other firms to enter the telecommunications industry mainly to enhance competition. Entrance of other players also meant that new innovations and infrastructure could be introduced in the industry unlike earlier when British Telecom was the only telecommunication service provider. Deregulation of the sector scrapped the price cap regulation on British Telecom which meant that the company had to depend on normal forces of demand and supply to determine the prices of their products and services.

Deregulation BT
Deregulation BT

The changes that the government was introducing in the 1980s were also aimed at making the British telecommunication industry an international standards leader. However, the industry was facing a competition crisis due to the existence of a duopoly policy in the provision of telecommunication infrastructure. The duopoly policy that mainly benefited British Telecom and Mercury was later abolished in 1991. New entrants in the provision of local access services such as Cable Television came into the market consequently increasing competition. It is from this move that major development on radio based telecommunication and mobile based systems such as PCS and radio access emerged. These new technological advancements brought about major influences in the telecommunications sector; something which had not been experienced before in the United Kingdom.

Initially, the privatization of British Telecom saw a price cap formula being introduced which meant that the company had to depend on rate rebalancing to determine prices. Further reforms in deregulation the industry have been deployed in recent years through, for instance, the announcement of the Chancellor of Exchequer, Gordon Brown, that as Better Regulation Action Plan was to be enforced as from May 2005. This new policy reduced the number of regulations from 29% to 7%, bringing about a 25% reduction in bureaucracies which also saw the Better Regulation Executive being transformed into the Regulation Commission.

Telecommunications in the UK

The duopoly policy was scrapped in 1991 following the publication of the White Paper. Earlier in 1989, further liberalization, deregulation and privatization had taken place. However, these changes were only of a domestic nature and not international per se. Until 1989, only two telecommunication services operators had been licensed, Vodafone and BT’s Cellnet. The White Paper which came into effect after duopoly policy, allowed CATV companies to start offering telecommunication services through their cable networks on their own rights. At the same time national public telecommunication companies were not permitted to offer any television services. Armstrong (1994) describes the first period of liberalization in UK telecommunication companies history as a period of opportunity loss due to ban on local service providers. The existence of only two licensed companies and very low competition were also a main feature of this period. Competition in the telecommunication market at that time was low. For example, it was until 1986, after four years of its licensed granted, that Mercury could get access to British Telecom’s local loop unbundled (LLU). Due to lack of competition, British Telecom wasn’t able to restructure itself ahead of a competition boom that was just about to hit the industry in the early 1990s. The essential developments in telecommunication companies are listed below:

  • Gradualness
  • Disambiguation
  • Regulating by negotiating
  • Expansion of the function of Regulation
  • Crimson selection
  • Rival mobile telecommunications
  • Sluggish reformation of BT

Today, competition is very high due to presence of many telecommunication companies that are periodically releasing of exciting and attractive offers to their customers. The most popular industry players among UK residents are BT Group, Virgin Media, BskyB and TalkTalk.

BT Group

British Telecom is a multinational telecommunication company whose headquarters are in London, United Kingdom. It is one of the largest telecommunication service companies in the world with presence in over 170 countries. Through its global service division, it supplies telecom services to corporate and government customers around the world. British Telecom Retail Division is a major supplier of telephone, broadband and subscription services in UK, having approximately 18 million customers. In 2012, British Telecom was unveiled as an official partner of London Olympics 2012 where it operated data network across 94 locations. The 2012 London Olympic Games were the first Olympic Games to completely rely upon VoIP (Voice over Internet Protocol) and Wi-Fi (Wireless) to relay information to the public.

The History of British Telecom by Years

1878-1969 January 1878: The First telephone was demonstrated to Queen VictoriaOct, 1969: The Post office ceased to be Government Department.
1969-1982 1977: CCR recommend further division of two main services1980: Renaming of the Post Office Telecommunications1981: Liberalization of the telecommunication industry starts

1982: License granted to run a public telecommunication network

1982-1991 1991: BT is privatized. The Government sold half of its remaining shares, reducing it to 21.8 %1993: All the government’s remaining shares are sold in a third flotation raises £5 billion for the Treasury. 750,000 new shareholders are introduced to company
1991-2001 1991: BT name was unveiled with a new organizational structure and corporate company
2000: Offered LLU (local loop unbundling)
2005: 105,055 lines had been unbundled
2001-2006 July, 2003: Office of Communications (Ofcom) introduced to replace Oftel.BT gets its Universal Service Obligation (USO) for UK, excluding the hull area. 
2006-present 1 April, 2009: BT Engage IT created14 May, 2009: 15,000 jobs are cut upJuly, 2009: offered workers a long holiday for an upfront sum of 25 % of their annual wedge or a one-off payment if they agree to go part time.

BT and Deregulation

Deregulation has seen British Telecom offer its consumers more pushy telephone packages. On the other hand, Ofcom has led to a decrease in pricing principles which has led to increased competition for all. Most communications companies are deregulating their retail services in the telecommunication market which is making British Telecom even more competitive. FTSE 100 group is also now offering some discounts in its packages (broadband, digital or 3G television) which include fixed-line calls for the very first time.

Ofcom has said that it had isolated the last bits of regulation after BT’s privatization 25 years. The reason raised was that it had no more market value to remain in UK telecommunications markets. Ofcom’s CEO, Ed Richards, said that it was an essential step in deregulating the telecom offers where competition is the main thing to just serve customers with better offers. Apart from BT customers, there are more than twelve million people residing in the UK who are using other telecommunication services. It is said that Virgin Media, BSkyB and TalkTalk are the most effective competitors for British Telecom.

According to estimates released recently, BT has fourteen million customers (fixed-line). Gavin Patterson, CEO of BT’s retail division, said about the new promotion that by this entire competing environment BT will be able to play the game on a better playing field as compared to previous one leading to more exciting offers. He also said that BT will announce new attractive offers in future for its valued consumers. UK residents are taking bundled offers at a large extent.

When we compared consumer’s choices by years, in 2008, UK customers have purchased two or more communication services from one service provider at the 46 % of total as compared to 2005 where 29 % did the same. This is according to Ofcom’s most recent counts. According to Ofcom, the actual competition uplift came into being when BT created Openreach in 2005. It has also provided services to BT’s competitors on equality basis. According to Kingham (2012), BT shares are one of the most popular shares with investors. BT is considered as a market leader operating in a safe and steady industry that is arguably well insulated from economic turmoil.

The following table demonstrates British Telecom’s increase in share prices in for the last ten years (Kingham, 2012). From the table, even if one can ignore the results of 2009, which was the time when most world major economies were experiencing economic downtown, it is suffice to say that, British Telecom has been experiencing a solid growth. Last year alone, despite falling sales and reduced spending by customers, British Telecom still returned a profit. The last quarter of 2012 saw an increased profit of 17% to 575 million Euros. The company also registered a quarterly decline in revenues of 5.8 billion Euros during the same period (Mike, 2012). All these can be attributed to the changes that this company has undergone in the last 20 years.


In conclusion, it is now a fact that BT Group is constantly deregulating which makes competition out there for other telecom companies a bit harder. It is also a fact that BT is enabling UK consumers to access reliable and cheap packages choosing options.

Hutchison 3G UK is currently allowing consumers to enjoy all calls on half prices as compared to other telecom operators. A wide range of bundles available in the market have enabled the consumer to choose according to his/her needs. This not only shows prosperity in the telecommunications industry, but also increases the chances of gaining benefits global wise in every aspect whether its country’s reputation or the company’s reputation.

As this is now the trend in UK, home based and business telecommunication consumers are now able to choose bundles (one or two or so on) according to their needs. Each market player is also offering exciting and attractive packages to its consumers with lots of offers such as free subscription, no initial charges or no line rent or any charges for six months. All these are exciting offers from telecommunication companies which attract consumers.

British Telecom is the first company in the UK to introduce public sector telecommunication service which has made BT has its own stage and own reputation. Apart from few drawbacks, BT is still the best choice of its consumers due to its services provided for its valued customers. Whether in Broad Band or fixed line, BT is a good choice of UK residents.


Mark Armstrong, Simon Cowan and John Vickers (1994) Regulatory Deregulation Reform: Economic Analysis and British Experience, London, Chapter 7 Telecommunications, pp. 195-244.

Mike D. (July 2012). BT profits despite slowdown in sales. European Deregulation Communications.

Kingham (September 7th, 2012). 5 Things about deregulation you should know before you buy BT shares. UK Value Investor

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Federal Communications Commission (FCC) deregulation policies in the UK

Financial Times: deregulation policies

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Principal Operating Units: BT Ignite; BT open world; BT Retail; BT Wholesale; BT exact Technologies

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Business Strategy BT

Development Strategy for Business Resilience and Sustainability through an Incremental Strategy – A Study of British Telecom

This report discusses the comparative analysis of three strategies namely incremental, renovate and inventive within the context of the internal as well as the external environment of a company such as BT (British Telecommunications Limited) which is a multinational telecommunications services company headquartered in London. It also evaluates a change management programme that can bring about strategic change within this organisation. BT has a global services as well as a retail division. Its operations span 170 countries throughout the world.

Company’s Internal and External Environment and Its Strategy Type

In the current business scenario, intense competition, integration across global markets, changes in technology and the advancement of the telecommunications sector are some of the external factors that influence the change management program of BT. the Company’s managerial talent and the level of the motivation of its workforce are some of the internal factors influencing strategic management. In order to improve the effectiveness of the organisation, strategy is the key because it leverages the capabilities of the individuals and the institution in a cohesive manner. The ideal development strategy for a company like BT that seeks business resilience and sustainability throughout its line of operations is an incremental approach.

Strategic Capabilities

Incremental strategies are effective within the current dynamic environment. Regulatory convergence is a key factor in the selection of incremental strategy for handling change and sustaining profits. The challenges of global competition have to be seen within the broader regulatory framework for effective strategic management. The incremental approach to strategic management is in response to the complex and ever changing corporate environment. Consequently, the strategic process moved in an incremental manner adapting to changes in the internal and external environment of the company. Decisions will then be driven by multiple goals. BT has low levels of business resources with respect to its telecommunications services though it is steadily expanding in the field of broadband communications. BT has reported a fall in sales though it experienced a healthy profit in 2013. Moderate or high business resources imply greater strategic capabilities which enable the company to excel using innovation or denotative strategic management. Annual pre-tax profits of BT were up by more than 40% but sales fell by 4%.

Business Strategy BT Competitive Analysis

The major feature of the incremental strategy is that it is decentralised and it responds to dynamic environmental challenges. BT is facing a changing socioeconomic milieu wherein the incremental approach accounts for this variable. An incremental strategy enables the organisation to fulfil its mission by closing the divide between long as well as short term goals within a changing environment. Organisational design followed a contingency approach since landmark research was conducted by Emery and Trist (1965) as well as Lawrence and Lorsch (1967). When a company faces a challenging environment, incremental strategy is far better than inventive or renovate strategies on account of the challenging environment faced by the company. As a British MNC which has to face global competition, BT should opt for an incremental strategy to boost its prospects and sales.  The degree to which the environment of a company is globalised also influences its development strategy. Porter has proposed the five force model for analyses of competition presented below:

Porters 5 Force Model
Porters 5 Force Model

Figure 1: Porter’s 5 Force Model from Michael Porter, “Competitive Strategies”

Porter’s model elucidates how competition from different sources can create industry rivalry. Competitive analyses in the context of an incremental strategy is suitable for organisations such as BT which want to cope with competition from different sources, as discussed in Porter’s model.

Business Strategy BT Competitive Advantage

BT needs to consider the complete gamut of competitors through an incremental approach to change management. Porter (1980) has argued that organisations should consider the behaviour of firms that are producing same/similar products as well as the action of suppliers, competitors producing substitute products and the customers themselves. An incremental strategy enables companies such as BT to develop a holistic view of the market to promote business resilience and boost profits. Competitive advantage has been discussed through a model proposed by Porter discussed below:

Porters Generic Strategies Model
Porters Generic Strategies Model

Figure 2: Porter’s Generic Strategies Model (Porter, 1980)

Ansoff (1985) has discussed how companies should also develop the strategy keeping in mind the flow of critical resources for production. They should also consider how they will impact non-market actors. Nonmarket actors or strategic interest groups also have an important role to play in influencing the development strategy of a firm. BT should follow a cost leadership strategy for low cost rather than aiming for product uniqueness as there are many rivals offering advanced services in this sector.


The culture of an organisation also plays a key role in influencing the strategy it adopts. The company’s abilities revolve around the resource, skills and procedures as well as its competencies. Attitudes and other cognitive factors reflect an organisation’s culture. The work culture at BT is unique. It focuses on completion of projects and garnering of crucial contracts. The organisational culture of a company influences its success in current times. BT needs to follow an incremental strategy whereby it adapts to changing global and domestic environment so that it can keep up with its competitors. The choice of a strategic management approach is based on several critical considerations such as an organisation’s strategic capabilities, competitive analyses, competitive advantage and culture.

An organisation must have a strategy that can meet the challenges of its internal or external environment (Ashby, 1961). Therefore, an incremental strategy would be ideal for enhancing the sustainability of business practices and the resilience of British Telecom. Consider the personnel, structure, systems and financial resources to be important factors in any strategy for change management. An incremental strategy follows a contingency approach which is ideal for British Telecom.

The organisation’s culture as reflected by collective values, experiences and beliefs of its members also has a critical role to play in its success. An incremental strategy for development and change management incorporates this effectively, making it the viable and effective choice for BT which has skilled employees. An incremental strategy is ideal for bringing about small but important changes in the organisational functioning compared to inventive or renovate strategies which focus on large scale change.

In order to possess business resilience and sustainability in its operations, BT needs to follow an incremental strategy to bolster its current organisational culture. Companies need to be proactive to cope with changes such as economic slowdowns, increased global competition and massive amount of technological advancement. BT would do well to adopt an incremental, contingency oriented approach to strategic management to cope with this.

Critical Evaluation of the Incremental Strategy

Incremental strategy is ideal for British Telecom.  An incremental strategy enables the company to have flexibility in coping with uncertainties in the field of policy regulation and governance.


There is a need to bargain with stakeholders and integrate human and organisational capabilities to catapult the company to the path of success. Renovate and innovative strategies can only be effective in environments where there are less regulation uncertainties (Lindblom, 1979). Each of the different resources within a company plays a critical role in its success. Through an incremental approach, British Telecom can impact its employees in a positive way. By instilling coping skills and out of the box thinking to manage dynamic and changing situations, BT can boost its profits.

Employees also differ in terms of their personal knowledge, perception, limitations, and it is due to this inherent complexity that incremental strategy can be the perfect tool for change. Diversity is one of the chief features of the workforce at BT. Therefore; development strategies followed here should take advantage of this versatility. Incremental approaches to strategic management can accomplish this.  Top managers within the same company can approach the same problem with different solutions (Bower & Doz, 1979).


Operations system provides guidance regarding how work procedures must be carried on and provides the framework for performing the work People are the key resources of any company. They are the prime assets which spur the growth and development of the organisation. Operations are a key area where rapid changes have to be kept pace with. The internal as well as external stakeholders also play a central role in the company’s success (Lindblom, 1959; Mintzberg, 1919). Balancing the goals and interests of stakeholders is the key to organisational success (Ansoff, 1985). BT should adopt an incremental strategy to improve operations.


Financial resources are necessary to accomplish goals and provide rewards. Money is one of the primary motivators for obtaining optimal performance from employees in the work setting. Annual pre-tax profits were up 42% to £2.4bn, last year for BT while sales were down 4%. An incremental strategy is ideal for a company such as BT which has ample financial resources.


Technology sets the stage for the company to maximise its capabilities if it keeps pace with it. Effective utilisation of resources is a must if a company has to progress and make healthy profits. An organisation’s culture is maintained and transmitted by its workers. Leaders of internal stakeholder groups are the key assets to instil positive change within an organisation. For companies such as BT that are facing moderate to heavy environmental turbulence, an incremental strategy for strategic management is needed (Mintzberg, 1973).

Several comprehensive reviews have been conducted by leading researchers in the field of strategic management (Hofer, 1976; Vancil, 1976; Armstrong, 1982). Research has found that degree of formality centralisation, hierarchical structure and comprehensiveness of any company is influenced by its environment, and complexity (Armstong, 1982, Hofer, 1976). In current scenario, an incremental strategy is optimal for BT.

Change Management Programme

A change management programme for British Telecom must incorporate an incremental approach. This is because its external and internal environment is more suited to an approach that makes allowances for sudden and rapid changes. Whether it is people, financial aspects, technological advancements or  organisational culture, all aspects of an organisation’s functioning need to be taken into account for effective change management. A conventional approach towards change management will not be successful. In 1995, John Kotter published his landmark paper “Leading Change: Why Transformation Efforts Fail”. This paper cited how only 30% of change programs are successful.

The biggest advantages of a change management programme for British Telecom through an incremental strategy is that it will make allowances for the rapid changes in technology and competition that are taking place in the Indian telecommunications sector. Colin Price and Emily Lawson (2003) suggested that the conditions which must be met for employees within an organisation to embrace change include their agreement to the change, effective role modelling for inculcation of change oriented behaviours, and reinforcement systems that encourage the behaviour and the skills required for change. The structures, systems, processes and incentives within a change management program should be conducive towards a positive transformation of the company into a reliable and sustainable business.

An incremental approach to strategic management can bring about this transformation for British Telecom. But change management processes should have an appeal for employees. Businesses that want to do more than survive have to remodel themselves to match up to competitors. Change management programmes have incorporated various methods such as total quality management, rightsizing, restructuring, cultural change and turnarounds in a bid to improve their profit margins. British Telecom needs to follow a change programme that pursues innovation in a way that is flexible and keeps in line with the incremental strategy of adapting to changes. Too many companies fail to progress beyond a certain point when it comes to garnering market share because they do not anticipate change due to factors such as advances in technology and industrial competition. Even a change management programme based on the incremental approach can have a few pitfalls though. Anticipating change is not easy. Many times, market analysts may be predicting a trend which is short-lived. Kotter’s 10 year study of more than 100 companies found unsuccessful change management programmes failed to generate the urgency or formulate a vision that could be communicated well to bring about a complete transition.

Companies need to be practical and realistic in their aspirations. Only then can change management programmes succeed in a complete sense. Obstacles to the change management programme suggested in this paper include rapid changes in the regulatory framework, unforeseen innovations and advancements in the field of technology and lack of market foresight. Genuine transformations require game changing ideas which can bring about creative solutions to problems. A change management programme based on an incremental strategy can only succeed if company personnel have the objectivity to view successes and failures in accurate ways.


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