Ofcom deals blow to BT with order to shape up on Openreach

It's not the split its telecoms rivals wanted, but the regulator has told BT to pull its broadband socks up, or else.

by Rebecca Smith
Last Updated: 25 Feb 2016

The long-awaited report in to the future of BT's Openreach broadband business has been delivered, and Ofcom's head Sharon White has played a clever hand. By stopping short of calling for an Openreach split but leaving the threat hanging if things don't improve, she has ensured that neither side has got their own way.

So there will be discontented grumblings from the likes of Sky, TalkTalk and Vodafone, which were pushing hard publicly for the breakup of Openreach and BT. But there’s also no doubt that BT has had its knuckles sharply rapped over its sluggish performance on broadband. White has been quite clear that if improvments -not only in speeds and availability but also in how BT takes accounts of the needs of its rivals - are not forthcoming, then a future split is definitely still on the cards. She hasn’t given BT a deadline for making the changes though, which might provide the company with more wriggle-room than its competitors would’ve liked.

So a politically adept piece of work from ex-Treasury number two White, but clearly reform rather than revolution, focusing on making the existing ‘functional separation’ structure, where Openreach has to treat all broadband retailers the same, work better.

Perhaps the most unexpected piece of the package is that BT will have to open up it's conduits - the telegraph poles and tunnels which carry the copper and fibre optic cables - to any rival company that fancies building it's own network.

Will any try? It would be an expensive and time-consuming business, but the move is another clear message to BT that it needs to work much harder on tech if it wants to remain in charge of the nation's digital infrastructure. (Its fibre to the cabinet technology has been much criticised as it is not as fast as the fibre to the premises used in many other countries. But it is much cheaper to install).

Its competitors have repeatedly pointed to Openreach’s poor record on repairs and being slow to invest more in upgrading infrastructure. Will White's report do much to address those concerns? A split could’ve done more to lessen BT’s dominant position, but as its CEO Gavin Patterson has said on several occasions, an independent Openreach would come with its own concerns - lack of access to the capital markets being the biggest. So the reality of a break-up could well be less rosy than those calling for it imagine.

There’s more behind the scenes (when is there not?), as Sky and BT in particular face off in their tug-of-war over pay TV. The former has been increasingly unhappy at BT’s hoovering up of broadcasting rights – though it might’ve been partly cheered by the recent disclosure of BT’s dismal Champions League figures. Just 200,000 viewers watched matches involving English clubs on its free-to-air BT Sport Showcase channel. That’s compared to an average peak of 4.4m during play-offs and group stage fixtures last season on ITV.

BT has tried to smooth over that by pointing out ITV’s established standing, saying its channel had only launched this year. However it is unlikely that BT's epic spending on sports rights, potentially at the expense of its broadband obligations, has gone unnoticed by Ofcom's White.

While her review could’ve caused a much bigger problem for BT than it has done, it’s certainly given the telecoms giant plenty of food for thought, whilst also leaving Sky, TalkTalk Vodafone et al slightly dissatisfied too . No-one in the telco sector can be in any doubt that there is a new sheriff in town.

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