Britain's telecoms and media watchdog is examining a break-up of BT Group, the former state-owned monopoly operator, in a move designed to promote competition in the UK's fixed-line telephony sector and decrease the burden of regulation.

Ofcom, the regulator, has asked Mr Peter Ingram, its chief technology officer and a former head of technology at BT Retail, to examine the pros and cons of splitting up BT into at least two separate units. A split could allow BT Retail to be freed from formal regulation by Ofcom.

The revelations are a strong sign that Ofcom, which only assumed its full regulatory powers at the end of last year, will not shy away from taking radical decisions. BT still has approximately 73 per cent of residential phone lines in the UK.

Under one scheme being examined, BT Wholesale, BT's network division, would be separated from BT Retail.

According to an internal memorandum written by Mr Ingram, this would mean only the wholesale business, including BT's valuable "last mile" copper-wire connections direct to households, would need to be regulated by Ofcom.

However, BT is firmly against a break-up and some of its competitors also argue against the move.

However, a split would be welcomed by many competitors to BT.