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Ofcom Reveals its Plans For Broadband – BT Keeps Openreach

Industry regulator Ofcom has published its interim conclusions of their Strategic Review of Digital Communications.

This strategic review sets out Ofcom’s approach to regulating communications markets for the next decade. It explains how they will ‘promote investment and competition to ensure that people and businesses get the phone, broadband and mobile services they need in coming years, wherever they live and work’.

Ofcom CEO Sharon White (pictured) says the key proposals in the report are:

“A strategic shift to large-scale investment in more fibre: We will help create more choice for people and businesses, while reducing the country’s reliance on Openreach. A major strategic shift will encourage the roll-out of new ‘fibre to the premise’ networks to homes and businesses, as an alternative to BT’s planned innovation in copper-based technologies. As part of this, BT will be required to open up its network, allowing easier access for rivals to lay their own fibre cables along BT’s telegraph poles and in its underground cable ‘ducts’.

A step change in quality of service: We will publish service quality performance data on all operators, and look to introduce automatic compensation for consumers and small businesses when things go wrong. We intend later this year to introduce tougher minimum standards for Openreach with rigorous enforcement and fines for underperformance.

Reforming Openreach: We intend to reform Openreach’s governance and strengthen its independence from BT. In future, Openreach should be governed at arm’s length from BT Group, with greater independence in taking its own decisions on budget, investment and strategy. Openreach management will be required to serve all wholesale customers equally, and consult them on its investment plans. Greater independence could be achieved by ‘ring-fencing’ Openreach (for example, Openreach becoming a wholly owned subsidiary with its own purpose and board members). Full ‘structural’ separation remains an option.

The right to broadband: We will work with the UK Government to make decent, affordable broadband a universal right for every home and small business in the UK. The universal right should start off at 10Mbit/s for everyone, and then rise in line with customer demand over time. We will work with the Government to deliver it. We will also look to improve mobile coverage by including new obligations on operators seeking new licences for spectrum (the radio airwaves which transmit mobile signals).
Empowering consumers to make informed choices: We will give consumers real power to exercise choice through much more accessible and engaging information on the services available to them. We will continue to make switching easier for more services so customers really can exercise choice.

Deregulate and simplify whilst protecting consumers: We will step back from regulation where people and businesses no longer need it, including when there is a real prospect of competition. Our ultimate goal is to improve communications services for everyone, not to increase regulation.”

So, as forecast by Comms Business Magazine, BT gets to keep Openreach however we note that Ofcom says “Full ‘structural’ separation remains an option.”

Commenting on the announcement from Ofcom BT Chief Executive, Gavin Patterson said:

“The UK is ahead of its European peers when it comes to superfast broadband and we want it to maintain that position. That is why BT is keen to make significant additional investments over the next five years and beyond.

“We want to build an even faster network and we also plan to address slow speeds in the final five per cent of the country. It is also important that we give small businesses further options aside from dedicated lines, which suit many but not all. Customer expectations have increased dramatically in recent years and we are keen to work with Ofcom and industry to meet those expectations. We all want to improve service. Openreach is already subject to regulated service standards and we are happy to work with Ofcom to improve them.

“Our plans would help ensure the UK remains the leading digital nation in the G20 and we are keen to get on with the job. They involve large scale investment however and that requires a high degree of regulatory clarity and certainty, something that is missing at present.

“Ofcom have today explained why breaking up BT would not lead to better service or more investment and that structural separation would be a last resort. We welcome those comments. The focus now needs to be on a strengthened but proportionate form of the current model and we have put forward a positive proposal that we believe can form the basis for further discussions with both Ofcom and the wider industry.

“Our proposal includes a new governance structure for Openreach as well a clear commitment on investment. Openreach is already one of the most heavily regulated businesses in the world but we have volunteered to accept tighter regulation to bring matters to a clear and speedy conclusion.

“We are happy to let other companies use our ducts and poles if they are genuinely keen to invest very large sums as we have done. Our ducts and poles have been open to competitors since 2009 but there has been little very interest to date. We will see if that now changes.

“We are keen to understand and address Ofcom’s concerns so we will review their paper in detail. A great deal of what they are proposing is already in place and we are open to discussions about how the current rules can be amended and updated. A voluntary, binding settlement is in everyone’s interests and we will work hard to ensure one is reached.”

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David Dungay

Editor - Comms Business Magazine