Vodafone has stated the structural separation of Openreach from BT is its preferred outcome from Ofcom’s review of the UK telecoms market, but maintains their legal separation is a positive step nonetheless.
Vodafone said in a statement: “We welcome the UK regulator’s recognition that BT can use its control of Openreach to discriminate against competitors and that the status quo cannot continue. Ofcom’s move to tighten significantly its regulation and governance of BT Openreach through legal separation while leaving the option of structural separation on the table is very welcome.”
Sky and TalkTalk, notably, echoed Vodafone’s comments yesterday (February 25), after Ofcom had announced plans for BT to open up its cable network, allowing competitors to connect the internet to homes and offices, as part of its Digital Communications Reviews (DCR).
Macquarie Research claimed surprise Ofcom had gone so far in its recommendations, stating it had effectively called for “structural separation without separation”.
“Ofcom's DCR proposals are more aggressive than we expected. They are effectively creating structural separation but without the change in ownership,” it said in a statement.
BT yesterday maintained a fierce stance in response, stating it was confident of a voluntary settlement, but would fight attempts by the regulator to force through any kind of separation of its Openreach business, whether in law or in effect.
Meanwhile, Frances Murphy, Head of Competition for Europe at law firm Morgan Lewis, said the decision not to separate Openreach is “worrying” in the light of Ofcom’s claims that Openreach still has an incentive to make decisions in the interests of BT, rather than BT’s competitors, and its concern that BT/Openreach is not suitably customer responsive.
“These issues will not be lost on BT’s competitors, large or small,” said Murphy. “Whilst the trade-off for permitting BT and Openreach to stay together appears to be the acceptance by them of tighter regulation and a commitment to improve their responsiveness to customers, Ofcom’s decision nevertheless leaves BT/Openreach free to grow its monopoly.
“Whilst Ofcom has reserved the right, formally, to separate BT and Openreach, any such separation in future may be too little too late to competitors and customers if by then Openreach is in possession of 95 percent of superfast broadband in the UK and is still not providing its customers with suitable service support.”
Adrian Baschnonga, Lead Telecoms Analyst at EY, said other issues, apart from the future of the country’s broadband infrastructure, merit attention as part of Ofcom’s strategic review.
Baschnonga said: “Balancing investment needs with healthy competition is no easy task, but the landscape of digital communications stretches well beyond the realm of infrastructure itself.
“Consumers now inhabit a world of smartphone apps and video streaming services, and incorporating these innovations within an impartial regulatory framework should not be overlooked.”