Wednesday, 18 July 2018

Ofcom raises concerns over BT's involvement in Openreach's strategic planning

By Chris Kelly, Total Telecom
Friday 15 June 18

Ofcom has published its first report into the separation of BT and Openreach and found that while progress has been broadly satisfactory, concerns arise over BT's influence over Openreach's long term strategic planning

The UK's telecoms regulator, Ofcom, has raised concerns over the degree to which BT is still able to exert influence over Openreach, despite the two companies agreeing to work towards a legal separation.  On Thursday, Ofcom published its first report into the separation process of BT and Openreach. While the report found that the pace of progress was broadly satisfactory…

The UK's telecoms regulator, Ofcom, has raised concerns over the degree to which BT is still able to exert influence over Openreach, despite the two companies agreeing to work towards a legal separation. 

On Thursday, Ofcom published its first report into the separation process of BT and Openreach. While the report found that the pace of progress was broadly satisfactory, it voiced concerns over BT's continued influence over Openreach's long term strategic planning. 

"Although progress has been made, we are concerned that BT and Openreach have not yet struck the appropriate balance between BT as a parent company, and Openreach as a legally separate and more independent part of the BT Group. We will be monitoring this area closely in the next financial year, to make sure BT does not have more influence than necessary and Openreach is making key decisions independently," read the report. 

Ofcom said that it had concerns that the current organisational structure of the company allowed BT to unfairly influence Openreach and stifle competition in the industry. 

"Our review identified a competition concern that the current structure of Openreach gave BT the ability to discriminate against those retail competitors who rely on the Openreach network to provide broadband. Specifically, as Openreach is vertically integrated within BT, we considered this led to a risk that BT had the incentive and ability to influence or determine strategic investment decisions that could favour BT’s retail divisions over other downstream competitors. 

"We considered that, without intervention, this competition concern could undermine the incentive for BT’s retail competitors to invest in developing their products and services," the report continued. 

The UK government has said that the country needs 15 million fibre to the home (FTTH) connections by the year 2025 in order to stimulate the evolution of its digital economy. As the UK's largest owner of national broadband infrastructure, Openreach will have a huge role to play in delivering those targets. 

A spokesperson for BT told members of the press that it was "absolutely committed to the strategic independence of Openreach," and would  continue to work with the regulator to ensure "financial planning processes strike the right balance". 

Ofcom said that it would continue to monitor the situation but accepted that BT Group has a legitimate financial interest in the performance of Openreach. 

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