The telecoms regulator Ofcom is carrying out a review into digital communications and is considering separating BT from its Openreach division.
The review is being carried out into the telecommunications industry as a whole and the separation is just one of a number of options being considered. Ofcom has now completed the first stage of its review and at the end of the process it is hoping to be able to ensure good-quality customer services, reasonable competition in the marketplace, value for money for the customer, and the right amount of investment into infrastructure and other aspects of the industry.
Openreach works to provide access to the networks offered by BT to other providers and the call for the split has also come from a number of rivals, particularly in light of BT’s decision to purchase mobile phone operator EE. The previous digital communications review was carried out more than a decade ago and led to the establishment of Openreach. The second phase of the review is scheduled to be completed by early October and the proposals will be finalised by the start of next year.
Ofcom said that the next stage will have four different options as to how the issue with Openreach can be addressed, including separating the division from BT to help to open up the marketplace. The remaining options are to leave the company as it is, with Ofcom monitoring the situation carefully to deal with any concerns about competition; making the current model stronger by making the rules tougher and ensuring that BT has to improve service quality; and promoting competition by deregulating. Ofcom has pointed out that companies such as Virgin Media have their own infrastructure, which could be opened up to rivals to encourage Openreach to improve its service levels.
The regulator has stated in its initial report that there have been significant improvements in telecommunications infrastructure in recent years, with superfast broadband now available to around 83% of premises in the UK and 4G available to around 90% of premises.
Paolo Pescatore, the CCS Insight director of multiplay and video, has described the potential break-up of BT as “big news” and believes that the pressure mounted by the company’s rivals has been enough to raise concerns with the watchdog. The reaction from BT has been to call for a pay TV market review.
The latest digital communications review is based on the competition in the market and how this translates for the end consumer. Mr Pescatore believes that separation of the two sections of BT is unlikely, as Openreach is already operating as a separate company to its parent.
The head of competition at Ofcom, Jonathan Oxley, said that BT will have to present evidence that an independent Openreach would not invest in ultrafast broadband, which is due to be trialled in parts of the country from next month. BT has stated that it is planning network upgrades that will see the ultrafast broadband being offered to consumers; however, this will depend upon the company retaining Openreach.