Telecoms are a natural monopoly, like gas, electricity and water. The investment required is so huge that it makes sense only to do it once - you don't need 2 different power lines coming into your house, 2 different sewerage systems etc.
Therefore these things have to be regulated to stop them abusing their monopoly positions to charge high prices for substandard service. (In theory - in practice all government regulators are hugely inefficient and end up going native).
The model that has been struck upon for regulation of most of these industries is to split the retail end of the business off from the ownership of the infrastructure, then to lightly regulate the retail end (competition should do that for you) and heavily regulate the infrastructure, monopoly business. This is done (in a simpified way) by having a fixed return on investment allowable (say 15%).
However, this means we end up with creative responses such as this - play up the size of the investment to ensure you have a larger cost base on which you can charge your monopoly rent, then cut the size of the investment later to what is actually needed.
This is just the first salvo in a long negotiation between OFCOM and BT regarding what regulated cost base it is allowed. We should probably be examining how much it has cost other countries before judging anything that is said here with a forked tongue...