As part one of its strategic review into the UK’s digital communications markets, regulator Ofcom is to decide whether Openreach should operate as ‘functionally separate’ from BT.
The first outcomes of the strategic review, published on Thursday (16 July), raise concerns over the “poor” performance of Openreach on behalf of providers, and suggests that separating it from BT – in which BT is required to provide access to competing providers on equal terms – could deliver competition or “wider benefits” for end users.
Ofcom stated that while the current approach has delivered “choice, quality and value” for phone and broadband customers since it came into play in 2005, challenges remain – such as that the incentive for BT to discriminate against competing providers can be limited by regulation, and that the fibre era may require different rules to the copper one.
“This review is about ensuring people get the best possible communications services, wherever they live and work,” said Ofcom chief executive Sharon White.
“Our priorities are clear. We want to promote competition, investment and innovation, so that everyone benefits from even better coverage, choice, price and quality of service in years to come.”
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However, the review raises questions over the wider implications for BT – particularly its position in the telecoms market in the face of growing competition.
In a blog post for telecoms.com, Scott Bicheno writes: “That Ofcom has chosen to explicitly focus on Openreach while at the same time declining BT’s plea for a closer look at pay TV means Sky is ahead on points at the end of round one.
“The forced split of Openreach from the rest of BT is still far from being a foregone conclusion, but at the very least Sky must be confident of increased regulatory scrutiny over BT’s wholesale broadband activities and maybe even lower prices.”
Sky has welcomed Ofcom’s decision to put the future of Openreach at the centre of its review.
“For too long, consumers and businesses have been suffering because the existing structure does not deliver the innovation, competition and quality of service that they need,” said Mai Fyfield, Sky’s chief strategy officer.
“We believe Ofcom should now move quickly to ask the Competition and Markets Authority (CMA) to undertake a full competition inquiry. In a rapidly changing sector, it is vital for the UK that the national telecoms network delivers a service fit for the 21st century.”
Ofcom’s last strategic review began in December 2003 and led to the creation of Openreach, through which BT is required to provide access to competing providers on equal terms, for them to offer telecoms services to consumers.
