Re: In theory....
"Alongside all that new cost - the underlying cost of running the business doesn't change. In fact, if prices are regulated and based on cost and the cost has just gone up, what do you think is likely to happen to prices?"
Firstly: Money that BT spends on Openreach does around to head office and back down to bt retail.
Secondly: The amount of creative accounting in the Telco world would make your head explode. Those "costs" are nothing like they're currently claimed to be - as evidenced by BT's charges to my employer estimated to be _halved_ if we had an alternate supplier in place.
Thirdly: You're discounting the profoundly chilling effect on the market that the dominant market controlling access to the lines has.
Openreach has to offer LLU, but it _will not_ sell dark fibre (which means that third party suppliers have to buy BT tail circuits and NTUs for the last mile at each end - 2 leased circuits - whilst BT only charge for one circuit) and they make it as difficult as possible for 3rd parties to both setup shop and get things done.
The single biggest transformation in New Zealand was accessibility to the network - bear in mind that the NZ regulators specifically looked at what had happened in the UK since Openreach was setup before ruling that the lines side had to be completely separated from the Mothership.
Telecom NZ was championing the BT/Openreach model and had internally moved to that model a couple of years before the break-up, renaming the parts "Spark" and "Chorus". The sea change in access happened when Chorus was fully separated. As with BT, prior to that point all unbundling moves had been made as slowly as possible and made as difficult as possible.
The traditional telco model is to artificially restrict supply and dictate prices, maximising profit. Once that dam is broken, prices drop slightly, but the removal of speed restrictions is more important. The lines company doesn't make any more if you put 1Gb/s or 100Gb/s down the unbundled fibre, so completely artificial pricing structures that imposed massive penalties for going faster are no longer there.
BT charges 5 times as much for a 10Gb/s ethernet tail as a 1Gb/s one and 5 times as much for that as a 100MB/s tail - the reality is that the equipment they put in to do 10Gb/s is 1/4 the price of the 1Gb circuit they put in 2 years ago, but they still charge you $20k installation and higher tail fees - because they can, not because of any actual technical reasons.