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BT circles wagons round Openreach as Ofcom mulls forced split-up

Bloodthirsty rivals cheer at thought of bloody amputation

BT has launched an offensive against moves to have its Openreach division completely hived off, with its view being that maintaining a near monopoly is the best thing for the country.

Ofcom’s 2005 strategic review resulted in Openreach being repositioned to become a separate part of BT, but rivals have long been pushing for complete separation.

They are hoping that the 2015 strategic review will lead to a complete cut-off of the infrastructure division.

It’s not a done deal yet, though. Ofcom said it would look at the separation as part of its strategic review and has now launched a second phase of the review and a consultation, although it’s pretty clear what respondents will say.

“We are pleased that Ofcom is looking at all the options for the future of the telecoms market as part of its strategic market review," said a TalkTalk spokesperson. "This is a once in a decade opportunity to make bold, radical decisions, such as the separation of Openreach.”

The consultation is based on a discussion document (PDF, 185 pages), and will set out the regulation for telecoms over the next decade.

Ofcom explained that the purpose of the review is to look at four areas:

  • investment and innovation in the market, which can help make services widely available
  • competition, to deliver quality services and affordable prices
  • empowering consumers and businesses, particularly making sure they have the information and means to choose and switch between providers
  • keeping regulation targeted at areas of concern, and deregulating where possible to allow markets to function well

The regulator is clearly worried about the impact of BT buying EE and Three swallowing O2.

The recent wave of mobile mergers internationally has prompted some commentators to suggest that investment would increase if levels of competition were lower.

We do not believe this is supported by the evidence. Econometric analysis from a range of sources, including some we have commissioned, suggests that there is a complex relationship between competition and investment.

In practice, it appears that market structure and competitive intensity combine with many other factors in influencing levels of investment.

Sharon White, Ofcom chief executive, said: “Our priorities are clear. We want to promote competition, investment and innovation, so that everyone benefits from even better coverage, choice, price and quality of service in years to come.”

Which rather flies in the face of moves to hike the amount mobile networks pay for using spectrum, which Ofcom paints as recognising the market value, and other plans to hold back 60MHz from the next auction.

Overall, the discussion document claims that the UK is doing rather well. BT agrees, telling The Register: “There has been huge progress these past ten years with an explosion in competition and broadband usage."

"Consumers are getting more for less and the UK has outpaced its European peers in terms of superfast broadband. Much of that progress is down to BT investing billions of pounds in fibre at the height of the recession," it added.

"That investment wouldn't have occurred had BT been split in two a decade ago, and our ambitious plans for ultrafast broadband also depend on BT remaining intact," it concluded.

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