Ofcom considering separating Openreach from BT

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Regulator completes first stage of Digital Communications Review with BT separation one of a number of options

Ofcom is considering separating BT Openreach from its parent company as part of its review into Britain’s telecommunications industry.

The regulator said it has completed the first stage of its Digital Communications Review which has a number of aims including ensuring quality of service, competition, consumer value for money and investment in the telco market.

BT Openreach provides wholesale access to BT’s phone, broadband and fibre network to competitors on equal terms. Many rivals including Sky and Vodafone have been calling for BT and Openreach to split after it agreed terms to purchase the UK’s biggest mobile phone network, EE.

Ofcom’s previous Digital Communications Review which was completed a decade ago led to the creation of Openreach.

It will complete the second phase of its review by 8 October before finalising proposals at the turn of the year.

Ofcom says the next stage of the review will include four options about how to address Openreach.

They are:

  • Separating Openreach which the regulator says could improve competition and help to simplify regulation of the market. Ofcom says it could remove BT’s underlying incentive to discriminate against competitors although it accepts it would be a difficult process which may not address quality of service issues.
  • Retaining the current model and Ofcom addressing any competition concerns
  • Strengthening the current model by applying tougher rules and penalties for BT to improve its quality of service
  • Deregulating and promoting competition between networks. Ofcom pointed to the likes of Virgin Media and other players which have their own telecoms infrastructure and said that opening up wholesale access to these networks could incentivise Openreach to up its level of service.

The regulator acknowledged in its report that the UK had benefited from significant advancements in its communications infrastructure. Superfast fibre broadband (24Mbps plus) is available to 83 per cent of premises and 4G mobile broadband is available to 90 per cent of premises from at least one operator.

CCS Insight director of multiplay and video Paolo Pescatore reacted to the news this morning.

He said: “The big news here is the proposed break-up of BT. Many of its rivals have been lobbying hard for this for some time and they’ve clearly mounted enough pressure to raise concerns. In response, BT has reacted by calling for a detailed review in the pay TV market.

“The major focus of the latest strategic review of the digital communications market is all about how well competition is delivering benefits to consumers and businesses. With this in mind, it seems that a full separation is unlikely as stated by Ofcom. Furthermore, Ofcom has acknowledged that the current system, whereby BT operates Openreach as a separate unit, has provided choice.

“It is especially interesting that Ofcom has chosen to conduct this review as we move towards two major acquisitions that will change the UK multiplay market. Only time will tell, but it is clear that Ofcom is sticking to its guns and we expect a formal conclusion to the review by the end of the year.”

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