Gosh, what a huge shock: Ofcom shies away from BT Openreach split, calls for reform

Tells BT to open up network to rivals

UK Communications regulator Ofcom waited until late February to shy away from recommending spinning off BT's Openreach, instead saying BT must open up its network to competitors and reform Openreach.

The initial conclusions of Ofcom’s Strategic Review of Digital Communications said BT must open up its network of telegraph poles and underground tunnels to rivals so competitors can connect fibre to homes and offices.

The once-in-a-decade review recommended a structural reform of Openreach, which will see the broadband division gain greater independence from BT.

However, it said Ofcom reserves the right to require BT to spin off Openreach "as an entirely separate legal entity, with its own shareholders."

Under the plans rival providers will be able to build their own fibre networks, connected directly to homes and offices.

In a statement that will surprise few, it said despite Openreach's obligation to treat everyone fairly "the evidence from Ofcom’s review shows Openreach still has an incentive to make decisions in the interests of BT, rather than BT’s competitors, which can lead to competition problems."

It said: "Openreach needs to change, taking its own decisions on budget, investment and strategy, in consultation with the wider industry."

A new governance structure will be put in place, with Openreach taking its own decisions on budget, investment and strategy – such as the deployment of new networks.

Ofcom also intends to introduce tougher rules on faults, repairs and installations; transparent information on service quality; and automatic compensation for consumers when things go wrong.

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

“So today we’ve 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."

BT welcomed the conclusion. BT chief exec Gavin Patterson said: "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.

“We are keen to understand and address Ofcom’s concerns so we will review their paper in detail. 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”

Ofcom will prepare detailed proposals later this year to implement these changes. ®

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