BT Openreach, the division created to provide access to the telco’s competitors on equal terms, looks set to be hived off into a separate company under proposals from the regulator Ofcom.
The announcement, part of the first phase of Ofcom’s strategic review, has been welcomed by rivals Sky and TalkTalk who accuse Openreach of being slow to install lines and carry out essential repairs.
“For too long, consumers and businesses have been suffering because the existing structure does not deliver the innovation, competition and quality of service that they need,” said Mai Fyfield, Sky’s Chief Strategy Officer. “We believe Ofcom should now move quickly to ask the Competition and Markets Authority (CMA) to undertake a full competition inquiry. In a rapidly changing sector, it is vital for the UK that the national telecoms network delivers a service fit for the 21st century”.
Openreach was created as a result of Ofcom’s last strategic review that began in December 2003. The regulator says that while the creation of Openreach has has delivered real choice, quality and value for phone and broadband, the incentive for BT to discriminate against competing providers has not been entirely eliminated.
Ofcom has put a series of options to consultation. These include:
•Retaining the current model, where Openreach operates as ‘functionally separate’ from BT, and using regular market reviews to address any concerns around competition;
•Strengthening the current model by applying new rules to BT – such as controls on its wholesale charges with stronger incentives to improve quality of service, or tougher penalties if BT falls short;
•Separating Openreach from BT could deliver competition or wider benefits for end users. It would remove BT’s underlying incentive to discriminate against competitors. Separation could also offer ways to simplify existing regulation. However, the process would be challenging and it may not address some concerns relating to Openreach – such as service quality, or the timing and level of investment decisions;
•Deregulating and promoting competition between networks. Virgin Media and a variety of smaller operators own networks, which allow them to provide phone and broadband services without using BT’s network at all. This kind of ‘end to end’ competition, which sometimes involves running fibre lines directly to premises, can help incentivise Openreach to improve its infrastructure. However, it could also lead to duplication of networks and weak competition.
It will also investigate the bundling of services including broadcast content.