A coalition of telecoms firms and trade groups, including Sky, TalkTalk, and Vodafone, has renewed calls for BT’s Openreach network business to be hived off into a “legally separate company”.
Openreach is responsible for maintaining the UK’s biggest phone and broadband network which is used by most of the country’s ISPs to provide services to their retail and businesses customers.
Access to the network is guaranteed by regulation but some of BT’s rivals are unhappy with the level of service provided, while others claim the business shows bias towards BT’s retail sales arm when developing new products.
Some, including Sky, have also questioned whether BT is too keen on exploiting its existing copper network at the expense of the UK’s broadband competitiveness.
Sky, TalkTalk, and Vodafone last year used an Ofcom investigation into Openreach’s future to call for its forced sale.
However a preliminary report published by the regulator in February concluded that a standalone Openreach would have little or no incentive to invest in new products or technologies.
The report said: “Given that the costs of rolling out the copper network have already been sunk, a structurally separate Openreach would have the incentive to exploit these assets for as long as possible, rather than investing in new networks.”
In addition, Ofcom said separation would fail to create more competition in the wholesale provision of phone and broadband lines, meaning “Openreach would have little incentive to deliver lower prices or better quality” and so would continue to need significant regulation.
As a result the regulator said BT would be allowed to keep Openreach but within a new governance structure which allows it “to take its own decisions on budget, investment and strategy.”
Competitors expressed disappointment with Ofcom’s decision and today Sky, TalkTalk, Vodafone and the Independent Networks Cooperative Association and the Federation of Communication Services trade bodies called on Ofcom to ensure Openreach becomes “a legally separate company” with its own “independent” board as a result of the changes it imposes.
The group have signed an open letter to Ofcom head Sharon White in which they set out a “10 Point Plan” to create “a better Openreach” by
Reforming Openreach’s governance so it can act independently:
Giving Openreach clear purpose and accountability by:
1. Establishing Openreach as a legally separate company
2. Creating an independent Openreach Board
3. Creating an independent body to oversee the transition and act as an adjudicator
Giving Openreach the tools it needs to succeed:
Creating a confident and ambitious Openreach that has the autonomy to plan for the future by:
4. Giving Openreach full control and ownership of its assets
5. Ensuring Openreach has its own standalone corporate identity and brand
6. Allowing Openreach to be financially independent and make its own investment decisions
Creating an Openreach that delivers for all:
Making sure that Openreach serves the whole market fairly to improve choice, value and quality for its customers by:
7. Providing all Openreach services on the same basis, no matter the customer
8. Ensuring that Openreach consults with all of its customers about its future strategy and proposed investments
9. Introducing competition to Openreach by making BT Consumer’s procurement truly contestable
10. Ensuring that Openreach does not inhibit investment by independent network operators.
The letter says: “If implemented in full, these reforms should deliver the step-change in effectiveness that customers need and remove barriers to a competitive market. The measures we have proposed are not controversial or drastic, but reflect arrangements which are commonplace for large listed companies. Our proposals are straightforward, simple, and can be achieved quickly and cost effectively.”
Andrew Griffith, Sky’s Group Chief Operating Office, added: “To help Ofcom deliver its goal of a more independent Openreach we’ve put forward a practical set of proposals based on tried and tested regulation of other utilities and established company law.
“These proposals can be implemented quickly and will deliver a much needed step-change in the performance of Openreach for millions of consumers and businesses across the UK.”