THE chief executive of BT Group has warned that 60% of British homes and businesses will be denied the benefits of the broadband revolution unless Ofcom, the industry regulator, changes its approach.

BT’s Ben Verwaayen said Ofcom’s method of encouraging more competition in high-speed internet services — known as local loop unbundling or LLU — would not work outside large urban centres.

LLU allows rival companies to install their own equipment in BT’s local exchanges, enabling them to provide faster and more sophisticated services than BT itself supplies.

However, Verwaayen said LLU was too costly to make it economical outside the top 600 exchanges, which cover about 40% of the population.

“What about the other 60%?” he asked. “What if your business is in Swansea or Southampton? In some places LLU simply does not work for economic and other reasons.”

BT contends that Ofcom is risking a repeat of the “digital divide” controversy that attended the initial roll-out of broadband. Many rural communities were initially unable to receive broadband because BT could not see a way of making a return on its investment.

BT is pressing Ofcom to relax regulations to allow it to create new versions of wholesale broadband, which could then be sold to communities outside the scope of LLU.

Verwaayen said: “We are committed to making sure that LLU is a successful tool, but LLU by its nature will be limited in its application.

“We need to make sure that advanced broadband services are available wherever business and consumers are located — whether you’re in Manchester or Liverpool or Southampton or Swansea or the Highlands.”

Faster broadband will make it possible to transmit television over BT’s wires, and introduce other advanced services that make use of video. For example, an e-mail could be converted to a video message and re-routed to a mobile phone.

Ofcom is close to completing a year-long review of the telecoms sector, with the aim of strengthening competition and encouraging investment in next-generation services.

After a slow start, BT’s rollout of basic broadband will be capable of reaching more than 99% of homes and businesses by this summer. Verwaayen said this was “on a par with running water ... We have the best coverage in the G7 and almost the best coverage in the world.”

• BT is strengthening its online-payments business by bringing together BT Click & Buy, which captures “micropayments” generated by web transactions, and BT Buynet, which processes credit-card purchases. David Hunter, who will head BT E-payments, said BT already handled about 5%, or £400m, of Britain’s online commerce, an area that is expected to grow rapidly.

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