Ofcom telecom rules protect BT from an expected split

The UK’s telecoms regulator said: “the evidence from Ofcom’s review shows Openreach still has an incentive to make decisions in the interests of BT, rather than BT’s competitors, which can lead to competition problems”. In its interim conclusions, published today, Ofcom doesn’t go as far as BT and its shareholders had feared – asking for a decisive split between BT and Openreach – however it has said BT must give competitors access to its infrastructure to be able to connect up advanced fibre networks to homes and offices.

Askar Sheibani, CEO of Sorrento Networks, says: “With better governance, more transparency, and by giving other service providers improved access to ducts and poles, the United Kingdom telecoms market is about to get considerably more competitive, which should provide a real boost to the UK’s digital economy”.

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. Our ducts and poles have been open to competitors since 2009 but there has been little very interest to date.

Despite still being a part of BT, Openreach will have to act more independently and be transparent with investments by making “its own decisions on budget, investment and strategy”, instead of being governed by the financiers at BT.

Do consumers and businesses have enough choice of networks? Ofcom introduced this structure in 2005, and it has delivered benefits such as stronger competition.

“The worst case has apparently been averted – though structural separation is still technically on the table – and we think that while BT won’t much like legal separation of Openreach within its group, ultimately the company can live with these proposals”, Citi analysts said.

Telecoms consultancy CCS insight said: “The news will be a relief for BT, but rivals will also claim victory as Openreach remains under severe scrutiny”.

“We are keen to understand and address Ofcom’s concerns so we will review their paper in detail”, chief executive Gavin Patterson said in a response.

Eli Katz, chair of United Kingdom telecoms trade association ITSPA (Internet Telephony Services Providers’ Association), said: “This… has confirmed ITSPA members’ views that Openreach has not delivered the performance that the communications industry or the United Kingdom needs”.

A Downing Street spokesman said: “We have always been clear that competition is key to delivering high-quality services”.

‘With Openreach now in the midst of its BDUK superfast broadband rollout, aimed at reaching 95 per cent of United Kingdom homes by next year – a rollout couched in £1.7billion of public money and a potentially vote-swinging degree of incumbent reputation – the decision should be seen as one of least disruption. We will see if that now changes.

The hope is that fibre investment by BT’s rivals will spur BT/Openreach to respond – or will alternatively make Openreach redundant if BT sticks firmly to its copper guns.

The proposed overhaul rather than spit-up comes after various rival companies such as TalkTalk and Sky militated to have BT spun so that connectivity across Britain would improve.

Virgin Media owns the only other national consumer-facing broadband infrastructure in the UK.