Ofcom demands Openreach overhaul to strengthen independence from BT

25 Feb 2016

British telecoms regulator Ofcom has unveiled the initial conclusions from its Strategic Review of Digital Communications, setting out plans designed to ‘improve telecoms quality and coverage, so that UK consumers and businesses receive the best possible phone and broadband services’.

While a number of the announced measures are expected to affect all major phone and broadband providers, the most notable relates specifically to Openreach, the division of fixed line incumbent BT that maintains the nation’s largest phone and broadband network on behalf of competing providers. As per Ofcom’s decsion, Openreach is required to open up its network of telegraph poles and underground tunnels to allow rivals to build their own fibre networks, connected directly to homes and offices. The regulator said that evidence from the review showed Openreach ‘still has an incentive to make decisions in the interests of BT, rather than BT’s competitors, which can lead to competition problems’. Citing the fact that the infrastructure unit lacks independence from BT Group, with the wider company retaining control over decision making and network budget, Ofcom has decided it is necessary to overhaul Openreach’s governance and strengthen its independence from BT. The watchdog will prepare detailed proposals later this year to implement these changes, and it said the new model might require Openreach to become a ring-fenced, ‘wholly-owned subsidiary’ of BT Group, with its own purpose and board members. Notably though, Ofcom has also said it reserves the right to require BT to spin off Openreach as an entirely separate legal entity, with its own shareholders, if it should deem it necessary in the future.

Ofcom noted that all its decisions are designed to achieve: better quality of service across the telecoms industry, with tougher rules on faults, repairs and installations to be introduced; and better broadband and mobile coverage, with Ofcom to work with the government to deliver a new universal right to fast, affordable broadband for every household and business in the UK, while the regulator intends to place new obligations in future spectrum licences to improve rural mobile coverage.

Commenting on the findings of the review, Ofcom chief executive Sharon White said: ‘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 … Together, this means a better deal for telecoms users, which will improve the services and networks that underpin how we live and work.’

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