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Openreach 'lacks independence'

BT ordered to open up cable network to rivals

OpenreachTelecoms watchdog Ofcom has ordered BT to open up its cables business Openreach in order to improve progress in building a digital network.

It says Openreach needs to change, taking its own decisions on budget, investment and strategy, in consultation with the wider industry.

The regulator said it intends to introduce tougher rules on faults, repairs and installations; transparent information on service quality; and automatic compensation for consumers when things go wrong.

Ofcom will work with the Government to deliver a new universal right to fast, affordable broadband for every household and business in the UK. We also intend to place new obligations in future spectrum licences to improve rural mobile coverage.

Openreach must make it much easier for competitors to access the network, and provide comprehensive data on the nature and location of its ducts and poles. Ofcom says this new ‘digital map’ of the UK will allow competing operators to invest, plan and lay advanced networks, giving people more choice over how they receive their phone and broadband services.

It says evidence from its review of the network shows Openreach still has an incentive to make decisions “in the interests of BT, rather than BT’s competitors, which can lead to competition problems.”

Openreach’s governance “lacks independence from BT Group”, it say, noting that the wider company has retained control over Openreach’s decision-making and the budget that is spent on the network. Other telecoms companies have not been consulted sufficiently on investment plans that affect them, it adds.

“Openreach management should be required to serve all wholesale customers equally, and consult them on its investment plans. There will also be greater transparency over how costs and assets are allocated between Openreach and the rest of BT.”

Ofcom will prepare detailed proposals later this year to implement these changes. The new model might require Openreach to become a ring-fenced, ‘wholly-owned subsidiary’ of BT Group, with its own purpose and board members. If necessary, Ofcom says it reserves the right to require BT to spin off Openreach as an entirely separate legal entity, with its own shareholders.

It will be subject to tougher, minimum requirements to repair faults and install new lines more quickly. These will build on measures introduced by Ofcom in 2014, but will set higher minimum standards and extend to other aspects of performance, such as how often faults occur.

Second, Ofcom will introduce performance tables on quality of service, identifying the best and worst operators on a range of performance measures so that customers can shop around with confidence.

Third, Ofcom intends to introduce automatic compensation for consumers and businesses when things go wrong. Broadband, landline and mobile customers will no longer have to seek redress themselves, but will instead receive refunds automatically for any loss or reduction of service.

Better broadband and mobile coverage

Ofcom says coverage of broadband and mobile services is “increasing fast”. More than eight in ten UK premises can now receive superfast broadband, and this is expected to reach 95% next year. Under Ofcom rules, 98% of homes and offices must receive an indoor 4G mobile signal by next year.

However, Ofcom remains concerned about those who cannot receive an acceptable service. “We will work with the Government to deliver the new universal right to fast, affordable broadband for every household and business in the UK. We also intend to place new obligations in future spectrum licences to improve rural mobile coverage.”

Ofcom will also ensure that consumers have accurate and easy-to-use coverage information, to help them choose the best provider. This will place further pressure on mobile network operators to improve coverage.

Last year, Ofcom launched a comprehensive map of mobile coverage by postcode for the whole UK. This will soon be updated to include broadband coverage, and it intends later to offer data for individual addresses.

Ofcom will soon consult on plans to make it easier for mobile customers to switch provider, to help increase competition in the market.

A better deal for telecoms users

Sharon White, Ofcom chief executive, said: “People across the UK today need affordable, reliable phone and broadband services. Coverage and quality are improving, but 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.

“Together, this means a better deal for telecoms users, which will improve the services and networks that underpin how we live and work.”

Gavin PattersonGavin Patterson (right), BT CEO, said: “The UK is ahead of its European peers when it comes to superfast broadband and we want it to maintain that position. That is why BT is keen to make significant additional investments over the next five years and beyond.

“We want to build an even faster network and we also plan to address slow speeds in the final five per cent of the country. It is also important that we give small businesses further options aside from dedicated lines, which suit many but not all. Customer expectations have increased dramatically in recent years and we are keen to work with Ofcom and industry to meet those expectations. We all want to improve service. Openreach is already subject to regulated service standards and we are happy to work with Ofcom to improve them.

“Our plans would help ensure the UK remains the leading digital nation in the G20 and we are keen to get on with the job.  They involve large scale investment however and that requires a high degree of regulatory clarity and certainty, something that is missing at present.

“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.

“Our 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.

“We are happy to let other companies use our ducts and poles if they are genuinely keen to invest very large sums as we have 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.

“We are keen to understand and address Ofcom’s concerns so we will review their paper in detail. A great deal of what they are proposing is already in place and we are open to discussions about how the current rules can be amended and updated. A voluntary, binding settlement is in everyone’s interests and we will work hard to ensure one is reached.”

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