ANALYSIS: Legal separation of BT and Openreach suits all parties as UK’s fibre rollout advances to the next stage
The decision to make Openreach legally separate from BT was always the most likely outcome of Ofcom’s once-in-a-decade review of the UK communications markets.
BT protested vehemently against such a move and its rivals called for stronger action i.e. full structural separation but both sides were simply taking steps to ensure they did not concede any ground.
All sides of the argument will be happy at this pragmatic decision.
BT gets to keep Openreach, its customers including TalkTalk and Sky will have a greater say in how the unit builds its networks and have chipped away at least some of BT’s power, while Ofcom believes it has made the broadband more competitive without jeopardising investment or having to engage in a costly or lengthy legal battle.
BT Openreach separation
“The agreement reflects Ofcom’s determination to improve BT’s performance and clear concern that the UK broadband market has not been as competitive or operated as effectively as it would have liked,” said Kester Mann, analyst at CCS Insight. “Its determination in negotiations with BT under the increasingly impressive stewardship of Sharon White, should be applauded.”
“A voluntary agreement has always been the preferred outcome over a forced legal separation, not least because the EU route that Ofcom were planning to use is uncertain, is untested, and would likely have taken much longer to conclude,” added Matthew Howett of Ovum. “The situation is also made more complex by the decision from the UK to leave the EU.”
Both TalkTalk and Sky have said they are happy with the outcome, despite previous assertions that only full separation would result in investment in fibre to the premise (FTTP).
BT’s argument that more parts of the UK have access to superfast broadband thanks to the current model and the decision to use fibre to the cabinet (FTTC) is probably true, but since 2009, the goalposts have moved and Openreach’s customers and the government now accept ‘pure’ fibre networks are needed to support the UK’s digital economy.
The argument offered by BT’s rivals was that as the incumbent operator, BT could stifle combination and sweat its copper assets because it had little incentive to invest in FTTP. But an independent Openreach changes that.
The next step will see Openreach rollout G.Fast, which speeds up copper connections, to the majority of the UK by 2025 and FTTP to two million homes and businesses. The suggestion is that this deployment could extend further.
“The message is clear, 2017 is the time to start the hard work and push on with delivering full fibre,” said Andrew Ferguson, editor of thinkbroadband.com.
”What many don’t realise is the Fibre to the Cabinet service that started to deploy in 2009 was always built with the fibre network ready to support fibre to the premises at a future date. So rather than having fibre in just 5,500 exchanges,
“Openreach today has fibre ready to some 81,000 locations and just needs the workers, budget and ambition to start pushing this out from those points to millions of homes.”
But perhaps the trolling of Virgin Media CEO Tom Mockridge might be the strongest source of motivation for the new Openreach.
“Openreach is just the same old snail’s paced network with a new shell,” he said. “Call it what you like but it’s still BT, four times slower than Virgin Media.”
Over to you, Openreach.