BT rolled with the punches today as Ofcom called for it to open its broadband network to competitors and take future decisions about budget and strategy in consultation with them.
The regulator resisted proposals to separate Openreach from BT in its the first part of its ongoing Strategic Review of Digital Communications. However, it said in a statement it reserves the right in the future to require BT to spin off Openreach as an entirely separate legal entity, with its own shareholders.
BT's competitors said Ofcom’s conclusions are neither extensive enough in their proposed scope, nor decisive enough in their proposed actions.
Dido Harding, Chief Executive Officer of TalkTalk, said: “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.”
A Sky spokesperson said: “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.”
In its proposals, Ofcom said Openreach must open up its telegraph poles and underground tunnels to allow competitors to construct their own fibre networks, and restructure to include the wider industry in decisions on budget, investment and strategy.
It will also introduce tougher UK rules on service quality and interruptions, and work with the UK Government to deliver a new universal right to fast, affordable broadband for every household and business, it said.
In response, BT called for “a strengthened but proportionate” reform of its current Openreach ownership, and has made a proposal to Ofcom to those ends.
Gavin Patterson, Chief Executive Officer of BT, said: “Our proposal 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.
“We are happy to let other companies use our ducts and poles if they are genuinely keen to invest very large sums as we have done. Our ducts and poles have been open to competitors since 2009 but there has been little very interest to date. We will see if that now changes.”
Virgin Media appeared to take the middle ground. Tom Mockridge, its Chief Executive Officer, remarked: “Ofcom has done the right thing by resisting separating Openreach, which would have sent a negative signal to infrastructure investors.”
Industry commentators suggested, on balance, BT’s competitors will have been encouraged by today's outcome, in principle at least.
“These operator complaints have primarily centred around Openreach’s inability to upgrade infrastructure, along with a lack of access granted to competitors to do so themselves, and a poor level of service. Ofcom is going to force tougher regulations on Openreach to ensure these issues are addressed,” said Matthew Kendall, Chief Telecoms Editor at the Economist Intelligence Unit.
“What is not yet clear, is how Ofcom will ensure that Openreach operates more independently from BT – another key outcome from its investigation.
“It seems to suggest the onus is on BT to take steps to ensure this independence. It said that if Ofcom does not receive the ‘responsiveness’ it was seeking, then a formal separation of BT and Openreach could be on the cards. For the time being, therefore, the ball appears to be in BT’s court, and Ofcom will not be afraid to turn up the heat.”
Paolo Pescatore, Director of Multiplay and Media at CCS Insight, said: “BT will breathe sigh of relief. Openreach contributes significant profits to the company and being forced to open up its network will spur rivals and could drive greater competition.”
He added: “This is really only a start of the next phase and there is still a long road ahead before a formal conclusion will be reached. It has already taken more than a year to get this point so all parties now need to work collectively to ensure an efficient and speedy outcome in the interests of consumers.”