Ofcom to make Openreach more independent, falls short of ordering sell-off
Written by: Sam Fenwick | Published:

Ofcom has today (25 February) announced that it will reform BTs governance of Openreach, the BT subsidiary that owns and managed the UK’s fixed line physical infrastructure, such as the copper network. It will produce detailed proposals later this year, aimed at increasing Openreach’s independence, allowing it to serve all its customers equally and increase the transparency of the split in costs between Openreach and BT.

The regulators decision has been prompted by its (perhaps unsurprising) finding that Openreach is incentivised to make decisions in the interest of its owner, BT.

Ofcoms new approach may lead to Openreach becoming a ring-fenced BT subsidiary with its own governance, but Ofcom reserves the right, if necessary to force BT to sell-off Openreach entirely.

As part of the changes, Ofcom will subject Openreach to tougher, minimum requirements for fault repair and the speed with which it installs new lines. Openreach will also be required to make its telegraph poles and ducts the small underground tunnels that carry telecoms lines, to competitors.

Ofcom will introduce quality of service performance tables to provide consumers and businesses with more transparency and to identify the best- and worst-performing operators. It also intends to introduce automatic compensation for users of fixed and mobile networks when things go wrong, eliminating the need for customers to seek redress for individual service interruptions.

People across the UK today need affordable, reliable phone and broadband services, said Sharon White, Ofcoms chief executive (pictured right). Coverage and quality are improving, but not fast enough to meet the growing expectations of consumers and businesses.

So today weve announced fundamental reform of the telecoms market - more competition, a new structure for Openreach, tougher performance targets, and a range of measures to boost service quality.

"Together, this means a better deal for telecoms users, which will improve the services and networks that underpin how we live and work.

BT's response
"Ofcom have today explained why breaking up BT would not lead to better service or more investment and that structural separation would be a last resort, said Gavin Patterson, BTs chief executive in response to Ofcom's announcement.

He added that BT has put forward a proposal to Ofcom which includes a new governance structure for Openreach as well a clear commitment on investment.

Openreach is already one of the most heavily regulated businesses in the world but we have volunteered to accept tighter regulation to bring matters to a clear and speedy conclusion, Patterson added.

He notes that Openreach's poles and ducts have been open to competitors since 2009, but there has been very little interest to date.

A great deal of what they are proposing is already in place and we are open to discussions about how the current rules can be amended and updated. A voluntary, binding settlement is in everyone's interests and we will work hard to ensure one is reached.

FCS sees move as a step in the right direction
We've been mooting full structural separation for some years now and having gone from being a lone voice in the wilderness, its been gradually picked up and it's been spoken about publicly.., said Catherine Gerosa, head of regulatory affairs at the Federation of Communication Services (FCS), while speaking with Land Mobile on the sidelines of the Mobile World Congress in Barcelona.

From what I've seen of the summary, it's good, it has moved very much in the direction we were hoping for, it's opening up the competition on the infrastructure, the telegraph poles and the underground network to the extent we'd like. The FCS wants proper competition, so our members aren't always stuck with one provider¦ It looks like it is moving very much in that direction.

I understand that there's going to be tighter monitoring of repair and provision, Ofcom introduced some new KPIs a couple of years ago, they're going to be tightening up on those as well.

Gerosa, notes that while Openreach's telegraph poles and ducts have been available to competitors since 2009, on a commercial basis, they're not just freely available and if the commercials are such that other companies can't access them then it does limit I think [Patterson's comment on the infrastructure already being available is] technically correct but it's proved difficult in reality.

TalkTalk fears "10 more years of debate and delays"
Ofcom has done well in identifying many of the worst problems, including recognising, finally, that BT's control of Openreach creates a fundamental conflict of interest which hurts customers, said Dido Harding, TalkTalk Group's CEO.

But having accepted all this, Ofcom has produced 100 pages of consultation with little concrete action behind it. The risk is that we end up with 10 more years of debate and delays, rather than facing into the problems and delivering improvements for frustrated customers now.>

"We welcome Ofcom's recognition that the current Openreach model is not working and that fundamental change is required, said a A Sky spokesperson. "BT must now be held to account for improving service and enabling delivery of fibre to Britain's homes and businesses.

Ofcom's actions today are not the end of the debate but a staging post towards delivering the network and service that Britain needs. We believe the simplest and most effective way to fix the current broken market structure is for Openreach to be completely independent. We are pleased to see that separation is still on the table

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