BT is confident a voluntary settlement can be reached with Ofcom over the future governance of Openreach, but has made clear it would fight attempts by the regulator and its industry peers to hive off the business from BT, whether in law or in effect.
Mark Shurmer, Group Director of Regulatory Affairs at BT, said: “We are confident we can come up with a set of proposals that will work for everyone, but it’s not a deal we will cut at any price. We have to have a sensible and proportionate response to the issues Ofcom says it’s found in the market. And that’s why we want to consider the detail and how we can amend our offer to address those concerns.”
He added: “Its decision [not to propose Openreach is separated from BT] is about more than just disruption and the cost. [Ofcom acknowledges] it wouldn’t lead to better quality of service or more investment, and it would require heavy regulation. So we’re convinced that won’t work, and we will resist anything that looks like that.”
Ofcom has called for BT to open its broadband network to competitors and take future decisions about budget and strategy in consultation with its peers as part of its Strategic Review of Digital Communications.
The regulator resisted proposals to separate Openreach from BT, but its competitors have urged Ofcom to take a harder line. TalkTalk said in a statement that the report had “little concrete action behind it”, and warned of “10 more years of debate and delays”. Meanwhile, Sky said the simplest and most effective recourse was to cut Openreach loose.
Ofcom said it reserves the right to require BT to hive it off if a quick resolution is not arrived at. Shurmer observed the regulator would be required apply to Brussels, if, in the final analysis, BT’s proposals don’t go far enough and it chooses such action.
“The quickest and easiest resolution is through a voluntary agreement. The alternative is to go to Brussels, where functional separation is positioned as a ‘remedy of last resort’,” he said.
“In other words, Ofcom has to go to Brussels and say it’s found a problem in the market, that the existing powers can’t deal with it, and that imposing functional separation is the only and proportionate remedy.
“To make that case – which we think is pretty challenging by the way, given how well the market is operating – it has to make a very detailed evidence-based case to Brussels, for it to referee and possibly veto. We think that’s a very challenging, long and complex legal process, and it’s in everyone’s interests to shortcut it.”
BT reasserted the UK market is not broken, as its competitors have said, and that the Openreach Charter it presented in September already addresses the essential concerns raised by Ofcom.
“In the document, Ofcom stresses the benefits of having Openreach as part of BT. It is a model that has worked for 10 years. Openreach is already functionally separated and ring-fenced from the rest of BT, and the result is we have the most competitive retail market in Europe,” said Shurmer.
“It is the reason why Sky and TalkTalk have come from nowhere 10 years ago to having market shares approaching that of BT itself. And that is a demonstration of how well it has worked to date. At the same time, we agree that, 10 years on, it is time to look at that model again, and we think we can reach a voluntary agreement on it.”