Ofcom: BT must open up but not separate from Openreach

BT must open up its Openreach infrastructure arm to competitors, but for now will not be forced to shed the unit entirely, according to Ofcom.

Publishing the initial conclusions of its review of digital communications, the UK broadcast regulator said that it is necessary to overhaul Openreach’s governance and strengthen its independence from BT.

Openreach should take its own decisions on budget, investment and strategy, in consultation with the wider industry. It must also open up its network of telegraph poles and underground tunnels to allow rivals to build their own advanced fibre networks, connected directly to homes and offices, according to the review.

Ofcom did not give into calls by BT’s operator rivals – including Sky – to order the separation of BT and Openreach, but left the option open to do so in the future.

“The new model might require Openreach to become a ring-fenced, ‘wholly-owned subsidiary’ of BT Group, with its own purpose and board members. If necessary, Ofcom reserves the right to require BT to spin off Openreach as an entirely separate legal entity, with its own shareholders,” said Ofcom.

The plans are part of plans by Ofcom to improve telecoms quality and coverage so that UK consumers and businesses receive the “best possible phone and broadband services.”

Under its new proposals Ofcom said that it is making it easier for all providers to share the same national network of underground pipes and overground infrastructure, and said that Openreacg will be subject to tougher, minimum requirements to repair faults and install new lines more quickly.

Ofcom also today announced a new strategy to promote large-scale roll-out of new ultrafast broadband networks based on cable and fibre lines, as an alternative to the partly copper-based technologies currently being planned by BT.

Ofcom CEO Sharon White said the plans will “help create more choice, while reducing the country’s reliance on Openreach”.

She added that the new, more autonomous Openreach will take independent decisions on “where to roll out broadband, how much money to spend on improving service quality and new high-speed broadband technology.”

Commenting on the finings of the review, BT chief executive Gavin Patterson said: “Ofcom have today explained why breaking up BT would not lead to better service or more investment and that structural separation would be a last resort. We welcome those comments.

“The focus now needs to be on a strengthened but proportionate form of the current model and we have put forward a positive proposal that we believe can form the basis for further discussions with both Ofcom and the wider industry.”

He said this proposal includes a new governance structure for Openreach and a clear commitment on investment. However, he added that Openreach is “already one of the most heavily regulated businesses in the world” and claimed that Openreach’s ducts and poles have been open to competitors since 2009 but there has been “very little interest” in investment from competitors to date.

A spokesperson for Sky said that Ofcom’s actions today are “not the end of the debate”.

“We welcome Ofcom’s recognition that the current Openreach model is not working and that fundamental change is required. BT must now be held to account for improving service and enabling delivery of fibre to Britain’s homes and businesses,” said the Sky spokesperson.

“We believe 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.”