Ofcom to keep close eye on BT Openreach separation

null

Ofcom says BT and Openreach are making progress in implementing their pledge to make the latter an independent organisation that serves all customers equally – but has made it crystal clear that it will keep a continued eye on the process.

BT agreed last year to make Openreach a legally independent company, complete with its own management, staff, branding and strategy. In exchange it would not be forced to sell the unit following Ofcom’s once-in-a-decade review of the UK communications industry.

This followed accusations from competitors that Openreach gave preferential treatment to BT, which exerted far too much influence over the division, giving the company an unfair advantage and ensuring it had no incentive to invest in fibre to the premise (FTTP) infrastructure.

Ofcom Openreach

In its first report on the independent Openreach, Ofcom acknowledged that Openreach now had its own board and strategy, but noted that it did not have its own employees due to “complexities” with the BT pension scheme. Now that these have been resolved, Ofcom expects the transfer to start soon and to be completed by the end of the year.

Ofcom is also pleased that BT has increased its FTTP target by 1 million properties to 3 million by 2020 but says it will expect “bolder” commitments in the future. The regulator also stated that industry partners had welcomed the greater transparency at Openreach but were still uncertain whether the changes would ensure equal treatment.

Mobile operators will be keeping a key eye on the situation given the importance of the Openreach network for site backhaul. There had been concerns that BT might prioritise innovations that benefited EE following the £12.5 billion takeover, while any potential competitor in the backhaul market might be put off by the probable inability to win EE’s business.

However Ofcom stated to the Competitions and Market Authority in 2015 that it had no significant concerns about the merger.