Ofcom has resisted calls to split BT and Openreach completely, instead ruling that it should become a legally separate company within the BT group, with its own board, branding and control over budget allocation.
The decision, which is being described as ‘the biggest shake-up’ to Openreach in its history, has been made because of the costs and complications involved with enforcing a total split. However, the government says that full structural separation ‘remains an option’.
Ofcom will consult on its plans until October 4th, and says the upcoming changes will ensure the broadband network is run in the interests of the UK and not just BT. "We need more fast fibre right to the doorstep," said Ofcom chief Sharon White, explaining that take-up in the UK is only at the 2% mark, compared with 70% in Japan. "If BT doesn't agree, we will use the rules and powers to enforce the change. We have the powers, we're clear we have the powers."
BT has long been criticised over its handling of Openreach, which has the pretty hefty responsibility of running the UK's broadband infrastructure.
Sky has welcomed Ofcom’s decision, but would have preferred the watchdog to be tougher. "Today's proposal to create a legally separate Openreach is a step in the right direction, although falls short of the full change that would have guaranteed the world-class broadband network customers expect and the UK will need,” said Jeremy Darroch, Sky’s group chief executive. “In particular, leaving Openreach's budget in the hands of BT Group raises significant questions as to whether this will really lead to the fibre investment Britain requires.”
However, some believe that a total split is now inevitable, despite Ofcom's statements. “This move is clearly the first in a multi-stage process toward severing Openreach from the BT Group completely,” said Cable.co.uk telecoms expert Dan Howdle. “If permanent separation were to happen, existing staff would need to be reassigned, a new board appointed, budgets allotted, and it would need to become discreet owner of its existing infrastructural assets – all of which is exactly what is happening today. Full separation is now inevitable."
Richard Neudegg, the head of regulation at uSwitch.com, got in touch with a lengthy statement on the matter this morning:
A complete separation of Openreach and BT has been put on the back-burner - for now at least. The regulator has given it the chance to make improvements to avoid potentially losing Openreach forever. Quite frankly, consumers - too many of whom are familiar with delays incurred by Openreach even when BT isn’t their retail provider - don’t care how it’s done. They just want and deserve a better service.
Too many of us don’t currently have the speeds necessary for a decent online experience. Despite the wide availability of fibre, we aren’t yet seeing widespread take-up - 30% of broadband users still register actual speeds of less than 5Mbps while just 10% are logging speeds above 50Mbps.
The broadband market is at a crossroads. The big question is how we achieve the right kind of competition and investment in the UK's broadband infrastructure - and a proposed re-structuring of BT Group doesn't answer that question by itself.
With today’s proposals on more independence for Openreach within BT Group, Ofcom is trying to give the network-arm more incentive to invest its money in the right places and boost other providers’ ability to compete on more aspects of broadband service. BT Group needs to get on with delivering some progress, and fast. We’ve seen Ofcom and government state clearly if we don’t see significant improvements, other options need to be considered.