Openreach separation among the options in new Ofcom consultation

16 Jul 2015

Having completed the first phase of its digital communications review, UK telecoms regulator Ofcom has published a discussion document seeking views on a number of issues from interested parties.

Ofcom has said it is focusing on four main areas in this publication, those being: 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; and keeping regulation targeted at areas of concern, and deregulating where possible to allow markets to function well.

Of these focus areas, a good deal of prominence has been given to competition, specifically with regards to Openreach, the infrastructure arm of British fixed line incumbent BT. With Ofcom noting that its last strategic review – which began in December 2003 and ended in September 2005 – had led to the creation of Openreach to serve alternative operators on equal terms, it said this approach had ‘delivered real choice, quality and value for phone and broadband customers over many years’. Now, however, it said challenges remained, while noting that it had concerns regarding Openreach’s performance on behalf of providers, which it said has ‘too often been poor, requiring the introduction of rules for faster line installations and fault repairs’.

With the review aiming to address such issues, Ofcom said it would seek views and evidence on future regulatory approaches, including retaining the current model, where Openreach operates as ‘functionally separate’ from BT, and using regular market reviews to address any concerns around competition. However, it has also said it would consider strengthening the current model by applying new rules to BT, including controls on its wholesale charges with stronger incentives to improve quality of service, or tougher penalties if BT falls short. Most notable, however, is that it is also seeking feedback on the possibility of separating Openreach from BT, and specifically whether such a move could deliver competition or wider benefits for end users. While Ofcom said such a move would remove BT’s underlying incentive to discriminate against competitors and offer ways to simplify existing regulation, it has noted that the process would be ‘challenging’, while it may not address some concerns relating to the infrastructure outfit, such as service quality, or the timing and level of investment decisions.

Ofcom’s consultation will close on 8 October 2015.

United Kingdom, BT Group (incl. Openreach), Ofcom