Split

The telecoms regulator has today published its preliminary proposals as part of a major Strategic Review of the United Kingdom’s Digital Communications market, but the big news is they’ve decided NOT to completely split BT from its national broadband and phone network (Openreach). Openreach was setup a decade ago after Ofcom’s original review in 2005, which among other things forced BT to open part of their network to competition (“functional separation“) and introduced Local Loop Unbundling (i.e. allowing rival ISPs to install their own kit in BT’s telephone exchanges, giving them more control over ADSL broadband and phone). Since then the market has evolved and the new “fibre broadband” (FTTC) services don’t offer the same kind of control or price flexibility as the older LLU ADSL solutions. Meanwhile many of BT’s rivals feel as if the operator still has too much control over Openreach and aren’t investing enough in their infrastructure, which they claim has damaged competition and performance. By comparison BT say they’ve invested billions into the national infrastructure, are delivering a good level of service (i.e. meeting Ofcom’s targets) and claim that their rivals seek a free ride off the back of all their hard work. BT has also warned that splitting Openreach could damage their plans to invest in future “ultrafast” G.fast broadband upgrades and the 10Mbps USO (details). Furthermore there were also fears about the risk from a protracted legal battle, concerns over how BT’s huge pension deficit and group debt would be split and uncertainty over who would provide Openreach’s future investment. On the other hand BT’s rivals believe that an independent Openreach could have fostered investment into superior FTTH/P technology and made the market more open and fair for everybody. Ofcom’s job in all this was to navigate the maze of conflicting claims and [...]