Ofcom to break BT’s Openreach network monopoly

 

Ofcom, the independent regulator and competition authority for the UK communications industries, revealed on Thursday that it plans to ensure digital communications customers receive better telecom quality and coverage.

The telecom watchdog said that Openreach, part of communications company BT, must open up its network of telegraph poles and underground tunnels to rivals such as Sky, Vodafone and TalkTalk, allowing them to build their own, advanced fibre networks to connect directly to homes and offices.

A Strategic Review of Digital Communications conducted by Ofcom, designed to make the UK a world-leading digital economy over the next decade and in the future, has resulted in the regulator setting out plans to make sure UK consumers and businesses receive the best possible phone and broadband services, with a choice of networks for consumers and businesses.

Openreach has a natural monopoly on the UK’s telecommunications network and Ofcom said it needs to change and consult with the wider industry when making decisions on budget, investment and strategy. Openreach will be required to make it much easier for competitors to access the network, as well as provide comprehensive data on the nature and location of its ducts and poles. A new ‘digital map’ of the UK will enable Openreach’s competitors to invest, plan and lay advanced networks, which will provide further choice for users on how they receive their phone and broadband services.

Tougher rules on faults, repairs and installations will be introduced by Ofcom, which will include transparent information on service quality and automatic compensation for consumers when things go wrong. Ofcom also plans to work with the Government to deliver every household and business in the UK with a new universal right to fast, affordable broadband. The regulator added that it also intend to place new obligations in future spectrum licences to improve rural mobile coverage.

In addition, Ofcom declared a new strategy to promote large-scale roll-out of new ultrafast broadband networks, which will be based on cable and fibre lines, as an alternative to BT’s current plans for partly copper-based technologies.

Evidence from Ofcom’s review indicates that Openreach makes decisions in the interests of BT, rather than BT’s competitors, which can lead to problems with competition problems. Openreach’s governance is said to lack independence from BT Group and the wider company has reportedly maintained control over Openreach’s decision-making and the budget that is spent on the network, while other telecoms companies have not been consulted sufficiently on investment plans that affect them.

Ofcom has decided that this evidence makes it necessary to overhaul Openreach’s governance and strengthen its independence from BT. It said Openreach must take its own decisions on budget, investment and strategy, including the deployment of new networks.

The new model for Openreach may require it to become a ring-fenced, ‘wholly-owned subsidiary’ of BT Group, with its own purpose and board members. Ofcom also stated that it reserves the right to require BT to spin off Openreach as an entirely separate legal entity, with its own shareholders, if necessary.

UK coverage of broadband and mobile services is growing at a fast rate, with over eight in ten UK premises now receiving superfast broadband. This is expected to reach 95% by 2017. Ofcom has also ruled that 98% of homes and offices must receive an indoor 4G mobile signal by next year.