Openreach is responsible for maintaining the phone and broadband network which is used by most of the country’s biggest ISPs to sell services to their customers. Access to the network is guaranteed by regulation but a number of BT’s rivals are unhappy with the service their customers receive from Openreach and its engineers.
Some also say the business is biased towards BT’s retail sales arm when developing new products.
Several of BT’s competitors, including Sky and TalkTalk, had used Ofcom’s review to call for the forced separation of Openreach from the rest of BT.
Critics of the firm argued that this would improve performance and boost investment in the network, however BT maintained that a standalone Openreach would have no greater incentive to invest than at present.
The preliminary findings of Ofcom’s review support BT’s argument, stating: “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 says an ongoing lack of competition means “Openreach would have little incentive to deliver lower prices or better quality” and would continue to need significant regulation.
Instead of ordering BT to split Openreach from the rest of the BT Group, Ofcom is instead proposing that other telecoms providers be allowed to use BT’s network of ducts and telegraph poles to lay their own cables.
BT says rivals have already been able to do this “since 2009 but there has been little very interest to date” and Chief Executive Gavin Patterson said the firm now looked forward to seeing whether complainants “are genuinely keen to invest very large sums as we have done.”
Over the coming months Ofcom will develop a new governance structure for Openreach to allow the business “to take its own decisions on budget, investment and strategy”, but says it “reserves the right to require BT to spin off Openreach as an entirely separate legal entity, with its own shareholders” if it’s unable to secure changes in the way the business operates.
Patterson said BT has already put forward “a positive proposal that we believe can form the basis for further discussions with both Ofcom and the wider industry.”
A spokesperson for Sky said it welcomed “Ofcom’s recognition that the current Openreach model is not working and that fundamental change is required,” and said the firm still believed a “completely independent” Openreach was the right solution.
In addition to measures aimed at addressing rivals’ concerns, Ofcom is to mandate automatic compensation for consumers when things go wrong.
Currently customers who experience faults of late or failed installations must argue with their service provider for any compensation but this will in future come an automatic right.
