25 February 2016

Ofcom chief executive Sharon White says new measures will mean a “better deal" for customers.

BT must open up its network so that competitors can connect fibre to premises, according to initial conclusions published today by Ofcom as part of its Strategic Review of Digital Communications.

The regulator first announced the review last year, and has now set out plans to improve telecoms quality and coverage so that consumers and businesses receive the best possible phone and broadband services.

It says that while many of the measures in its review affect all major phone and broadband providers, others relate specifically to Openreach which it believes should be reformed.

Ofcom has announced a new strategy to promote large scale rollout of new ultrafast broadband networks, based on cable and fibre lines, as an alternative to the partly copper-based technologies currently being planned by BT.

It says supporting investment by rival providers will reduce the country’s reliance on Openreach, and increase competitive pressure on its network.

Openreach will be required to open up its telegraph poles and ducts to enable competitors to build their own fibre networks, connected directly to homes and offices.

Openreach to be reformed

Ofcom says that while Openreach is part of the BT Group, it has obligations to treat all its customers equally. 

However, the regulator says evidence from its review shows Openreach still has an incentive to make decisions in the interests of BT, rather than BT’s rivals, which can lead to competition problems.

As a result, Ofcom say it is necessary to overhaul Openreach’s governance and strengthen its independence from BT. 

In future, it says Openreach needs to take its own decisions on budget, investment and strategy such as the deployment of new networks. More detailed proposals to implement the changes will be prepared later this year.

Ofcom chief executive Sharon White said that while telecoms and broadband service coverage and quality are improving in the UK, it is not fast enough to meet the growing expectations of consumers and businesses.

“So today we’ve announced fundamental reform of the telecoms market – more competition, a new structure for Openreach, tougher performance targets, and a range of measures to boost service quality,” she said.

Among other plans, Ofcom intends to introduce stricter rules on faults, repairs and installations. It says there should be transparent information on service quality, and automatic compensation for consumers when things go wrong.

The regulator says it will also work with the Government to deliver a new universal right to fast, affordable broadband for every household and business in the UK. As part of this, future spectrum licences will include new obligations to improve rural mobile coverage.

No interest in BT’s ducts and poles?

In a statement detailing its reaction to the review, BT said it remained “keen” to work both with Ofcom and the industry to meet customer expectations that have “increased dramatically” in recent years.

Chief executive Gavin Patterson said: “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.”

BT’s 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,” said Patterson.

He added that other companies are welcome to use BT’s ducts and poles if they are “genuinely keen” to invest very large sums as BT has 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.”

Copper “masquerading” as fibre

There has been a mixed response from other parts of the industry to Ofcom’s initial conclusions.

TalkTalk Group CEO Dido Harding said the regulator has done well in identifying many of the worst problems, including recognising that BT’s control of Openreach creates a “fundamental conflict of interest” which hurts customers.

“But having accepted all this, Ofcom has produced 100 pages of consultation with little concrete action behind it,” she said. “The risk is that we end up with 10 more years of debate and delays, rather than facing into the problems and delivering improvements for frustrated customers now.”

BT’s continued reliance on copper is inadequate to meet soaring demand, according to CityFibre CEO Greg Mesch.

CityFibre claims it is the country's second biggest infrastructure provider behind BT, and welcomed the recommendations.

It said Ofcom’s report clearly concludes that to enable widespread availability of competing FTTP networks, a strategic shift to support large-scale investment in end-to-end fibre is required. 

The company’s CEO Greg Mesch added: “Ofcom also recognises that at a technological level, BT’s continued strategic reliance on and investment in copper-based infrastructure – often masquerading as fibre – is inadequate to meet the soaring demand driven by new services and increased usage habits that the market continues to observe.”

Meanwhile for Gigaclear, an ISP dedicated to building FTTP broadband networks in rural Britain, it will be business as usual.

Chief executive Matthew Hare said: “Gigaclear continues to invest in building new FTTP networks and, regardless of whether Openreach stays within the BT Group, intends to bring gigabit internet to tens of thousands more rural homes and businesses this year.  

“The support for a stable investment climate will help us reach hundreds of thousands in the years ahead.”