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BT and Openreach: Can this new plan fix Britain's broadband woes?

The competition believes the regulator does not go far enough and full separation of BT's wholesale and retail arms is now "inevitable".
Written by Colin Barker, Contributor on
Image: Robin Jones, The Digital South

The controversy around BT's dominance of the UK's telecoms market, and its broadband provision in particular, continues to rumble on.

Regulator Ofcom's latest plan to tackle the situation is to make BT's wholesale broadband arm Openreach "a distinct company, with its own board", and it says that BT should "prepare to open up its network to competitors". But it has not required BT to spin off Openreach, which runs the broadband network used by both BT and its rivals.

This model provides Openreach with the greatest degree of independence from BT Group without incurring the costs and disruption -- to industry and consumers -- associated with separating the companies entirely, Ofcom said.

But the move is unlikely to satisfy some of BT's competitors as Ofcom will only say that BT "should" separate the two halves, not "must".

Ofcom's eight-point plan for a new-look Openreach starts by declaring that it should become a "legally separate company within BT Group", with directors who would be "required to make decisions in the interests of all Openreach's customers".

The new company should have its own board with a majority of non-executive directors not connected to BT; however, the board would be both appointed and removed by BT "in consultation with Ofcom".

The same caveat applies where Ofcom says that there "should be no direct lines of reporting from Openreach executives to BT Group, unless agreed by exception with Ofcom".

Dan Howdle, consumer telecoms spokesperson for broadband advice site Competitor Cable, believes that the move is the first step in "a multi-stage process toward severing Openreach from the BT Group completely".

For a full separation to be achieved, existing staff would need to be reassigned, a new board appointed, and budgets allotted. But the tricky part would be to make the new entity a "discreet owner of Openreach's existing infrastructural assets", as it is now.

However, Mark Collins, the director of strategy and policy for CityFibre, a fibre broadband supplier for UK cities, said that the proposals "do not address Ofcom's key objectives of reducing the country's dependence on Openreach and encouraging essential investment in fibre".

While it correctly identified Openreach as the "principal source of the industry's dysfunction, it is hypocritical of Ofcom to focus on a restructured Openreach as a panacea", he said.

The wireless broadband supplier Mimosa also believes that the Ofcom report does not go far enough.

"The infrastructure problems facing the UK market that prevent the rollout of a nationwide next-generation broadband network still remain," said Mimosa's co-founder, Jamie Fink.

"The cost and disruption of digging trenches to lay fibre-optic cabling has left many areas to contend with legacy, low-performance broadband solutions," he added.

Others were more welcoming. Fiona Keenan, strategic insight director for the consumer affairs analysts Kantar Worldpanel, said that the Ofcom report marked "a step change for the UK telecoms market".

The proposed reforms could "go far in fostering a more consultative, transparent approach to infrastructure development, as well as increasing investment," she said.

It should also "suppress concerns from other providers who have always felt that BT's control over Openreach has stymied their growth", according to Keenan.

The full Ofcom report can be found here.

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