The report claims that BT’s current structure as four main horizontal lines, business- wholesale, Ignite, openworld and retail, is the first step toward a new industry paradigm that Forrester calls "layered telecom" and has already-manifested benefits that could deliver £10 billion in present value terms.
Forrester believes, however, that BT’s strategy will soon reach the limits of what internal layering can deliver.
Senior analyst Lars Godell said: “In 2006 a break-up - a separate listing of BT's retail, innovation, and network businesses - will be seen as a natural evolution, not revolution inside BT.” He added that the newly independent business units would “concentrate on innovation, deliver higher revenues and lower cost.”
The report also points out that a break-up strategy has significant risks that could cost BT more than £5 billion in a worst-case scenario.
Finally, Forrester warns that European regulators could “easily wipe out most of the expected break-up benefits if they were to mandate break-ups of BT and other incumbent telcos”, and recommends that “regulators must encourage voluntary structural separation by granting incumbents that break up on their own terms full relief from their industry-specific regulatory burden."