Ofcom orders BT to make Openreach more independent

30 November, 2016, 14:41 | Author: Bridget Leonard

In an update outlining its current plans, Ofcom said it was "disappointed that BT has not yet come forward with proposals that meet [its] competition concerns", adding that while some progress had been made, it did not feel this was enough.

There have always been worries that BT's position of controlling the United Kingdom broadband network while simultaneously operating a retail business was a conflict of interest, and Ofcom recently informed BT that Openreach must be transformed into a "legally separate company" to BT.

"The hope is that by reducing the influence of BT Group on Openreach, it would be likely to invest more in faster broadband technology that allows more providers, such as Sky and TalkTalk as well as BT, to offer a better service to their customers".

TalkTalk chief executive Dido Harding said: "While we do not think legal separation goes far enough to deliver the broadband consumers deserve, it is at least a step in the right direction".

On Monday night, BT appointed the first independent chairman of its Openreach arm - hiring Mike McTighe, who was on the board of Ofcom between 2007 and 2015.

Ofcom said that it had decided not to go for an entirely separate Openreach, with different shareholders from BT, because of the extra cost.

In a statement BT said: "We will continue to work with Ofcom to reach a voluntary settlement".

Rival companies such as Sky, Vodafone and TalkTalk have long urged the regulator to force a full split between BT and Openreach.

But it warned: "If Ofcom's monitoring suggests that legal separation is not delivering sufficient benefits for the wider telecoms industry and its customers, we will return to the question of structural separation - fully breaking up the companies".

A spokesperson for sky wrote "Let's not forget why we are here - BT Openreach has continued to fail consumers".

Born from the General Post Office, which between 1912 and 1969 ran the UK's telecommunications network on behalf of the government before being floated as a public corporation and split off into Post Office and British Telecommunications divisions in 1981, BT has a de facto monopoly on 'last mile' copper provision within the UK.

"It is also of course made more complex by the decision from Britain to leave the European Union".

The legal process could drag on for years, analysts have said, and BT has said the case in Europe is "a hard one to make".

Earlier this year Ofcom set out its competition concerns: that BT has the incentive and ability to favour its own retail business when making decisions about new network investments by Openreach.

Talks between BT and regulator Ofcom to find a voluntary solution to the problem seem to have broken down. Jaime Fink, co-founder at Mimosa Networks said: "Despite Ofcom's proposal, the infrastructure problems facing the United Kingdom market that prevent the rollout of a nationwide next-generation broadband network still remain".

BT and Openreach effectively own the nation's telecoms system, giving them enormous power over standards of service.

"Today's announcement represents just the next stage in a long and protracted issue".

United Kingdom regulator Ofcom has published its proposed 2017/18 Annual Plan for consultation, outlining its areas of work for the financial year to March 2018. "In the interest of stability and market certainty, the sooner a final outcome can be reached the better".


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