The natural monopoly BT has is the core network and the geographical exchanges in every town. In the case of BT it was handed a national network which it then gets to monetise: in return it had to continue to provide 'universal service'. The problem with this type of set-up is that it puts BT in the position where their best minds are in an arms race against the regulator: they use all sorts of tricks to show how expensive their core network is and they make it very difficult for alternative providers. It's just natural, if they can create barriers to competitors or price competitors out then it's to their benefit.

While I'm not in that industry more I'm citing personal experience - I was at a provider when ADSL was coming onto the scene and they made it very difficult and complex to form your own backbone network. It means that you're going to "innovate" on top of the BT network - which will never be disruptive to BT.

There are other situations where you can see the level of monopoly they have. For example, they basically held the government to ransom when they said they "might" not built the advanced network (21CN) which got them a pile of cash.

It's consumers and business outside of the South East (London) that suffer - consumers because it's basically everyone is held to the speed of BT's innovation, and business outside the South East because there often aren't alternatives.