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BT Releases Openreach to Avoid Regulation

Agreement expected to boost broadband competition

March 13, 2017

UK telecommunications giant BT has agreed to turn its Openreach unit into a legally distinct company to address concerns from the Office of Communications (Ofcom) - UK that the existing relationship between service provider BT and infrastructure-focused Openreach hampers competition in the UK telecom space.

Established in 2006, Openreach maintains the UK’s physical telecommunications infrastructure—literally the telephone poles, tunnels, and copper wires and fiber cables that connect nearly all businesses and homes in the UK to the country’s national broadband and telephone network. More than 500 phone, broadband and TV service providers in the UK use Openreach’s infrastructure, according to the company.

Ofcom announced plans last year to overhaul Openreach’s governance and strengthen its independence from BT, due to concerns that telecom companies aside from BT were not being consulted sufficiently on investment plans that affected them. Some of those outside companies have complained that BT has hampered their ability to offer subscribers “superfast” broadband access.

According to a July 2016 article in The Guardian citing figures from Ofcom CEO Sharon White, just 2% of the country received ultrafast broadband delivered via fiber-optic lines, a figure far behind those of leading countries, where that percentage is 60% or higher.

To date, however, the BT-Openreach relationship would seem to have done little to deter uptake of less advanced fixed broadband in the UK. According to Eurostat, 87% of UK households had fixed broadband internet access in 2016—the fourth-highest rate in Europe.

Whether the new agreement affects the quality or cost of fixed broadband and other telecom services in the UK remains to be seen.

According to Ofcom, BT has agreed to all the changes necessary to address Ofcom’s competition concerns, while at the same time still maintain ownership of Openreach. As a result, Ofcom said it will no longer need to impose the desired changes through regulation. The reforms have been designed to begin this year and will require Openreach to consult formally with customers like Sky, TalkTalk and Vodafone on large-scale investments.

In the future, there will be a “confidential” phase during which service providers can discuss ideas without it being disclosed to BT, in addition to further protections for confidential customer information.

“This is a significant day for phone and broadband users,” White said. “The new Openreach will be built to serve all its customers equally, working truly independently and taking investment decisions on behalf of the whole industry, not just BT.”

BT’s commitments also include reforms to how it works in Northern Ireland, where Openreach does not operate.

—Cliff Annicelli

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