Openreach to part company with BT Group

26-Jul-2016

Plans are afoot for Openreach to become a distinct company, with its own Board, splitting from BT Group

  • BT prepares to open up its network to competitors.
  •  Progress on better quality of service for all telecoms customers
  • Openreach should become a distinct company, with its own Board

Ofcom has today announced detailed plans to make digital communications work for everyone - including major reform of Openreach, the network division of BT. In February, Ofcom outlined measures to help make the UK a world-leading digital economy over the next ten years and beyond, by delivering a step-change in telecoms services for everyone. These plans focused on a more independent Openreach; greater choice of broadband networks, including fibre connections to homes and offices; better quality of service across the whole industry; and better broadband and mobile coverage for people and businesses. Ofcom has today announced progress in these areas. 

Openreach is the part of BT Group that develops and maintains the UK’s main telecoms network used by telephone and broadband providers such as Sky, TalkTalk, Vodafone and BT Consumer. Openreach has obligations to offer the same products to all customers on the same terms. Ofcom introduced this structure in 2005, and it has delivered benefits such as stronger competition. However, BT retains influence over significant Openreach decisions. BT has an incentive to make these decisions in the interests of its own retail businesses, rather than BT’s competitors, which can lead to competition problems. In February, Ofcom said that Openreach must become more independent from BT, and has today proposed how this should work. Ofcom’s proposed model, announced today, is for:

  • Openreach to become a distinct company.
  • Openreach should be a legally separate company within BT Group, with its own ‘Articles of Association’.
  • Openreach - and its directors - would be required to make decisions in the interests of all Openreach’s customers, and to promote the success of the company.
  • Openreach to have its own Board. The new Board should have a majority of non-executive directors, including the Chair. These non-executives should not be affiliated to BT Group in any way, but would be both appointed and removed by BT in consultation with Ofcom. Executives accountable to the new Board.
Openreach’s Chief Executive should be appointed by, and accountable to, the Openreach Board - not BT Group. The Chief Executive would then be responsible for other executive appointments. There should be no direct lines of reporting from Openreach executives to BT Group, unless agreed by exception with Ofcom.

Ofcom’s principle for the new model is that people who work for Openreach should be employees of the new company, rather than BT Group. This would prevent any real or perceived conflict of interest, and allow Openreach to develop its own distinct organisational culture. Openreach to own assets that it already controls. Openreach should own its physical network. This would allow the Openreach Board to make decisions that depend on investing in, and looking after, Openreach’s assets. 

We welcome BT’s acknowledgement of the need to reform Openreach, and elements of BT’s proposal. Boosting investment in fibre networks. In February, Ofcom committed to make it easier for telecoms providers to invest in advanced, competing infrastructure by improving access to Openreach’s network of telegraph poles and its ‘ducts’ - the underground tunnels that carry telecoms cables. This would make it possible for competitors to connect their own fibre optic cables directly to homes and businesses, delivering more choice for people and businesses over the next decade, while reducing the UK’s reliance on the Openreach network. 

On Sunday (31 July), new rules come into force that will give telecoms providers further rights to access physical infrastructure. These measures are designed to reduce the cost of deploying broadband networks, by sharing access to infrastructure across different sectors. A number of companies are continuing to roll out ultrafast fibre networks. Virgin Media is investing £3bn to extend its network across the UK. CityFibre, Sky and TalkTalk are connecting fibre to premises in York, and KCom is doing so in the Hull area. Other providers, such as Hyperoptic and Gigaclear, are bringing ultrafast broadband to local areas. A step-change in quality of service. In February, Ofcom also announced a range of measures designed to ensure that all phone and broadband companies provide service quality that customers expect. Since then, Ofcom has taken significant steps to improve services, as well as boosting coverage - including, automatic compensation. We have begun discussions with industry to require telecoms companies to provide automatic compensation to customers when their service falls short. 

Ofcom believes that all homes and offices should receive at least 10 Mbit/s - enough to stream TV, make video calls or hold virtual meetings - and this minimum should increase over time. Improving business lines. We have introduced new rules to require BT to provide access to its fibre network of high-speed business lines to competitors. In the coming months, Ofcom will carry out further work on tough performance rules on Openreach. Later this year we will set out stricter minimum requirements for Openreach to repair faults and install new lines more quickly. Performance tables from next year, where tables will be published on communications providers’ quality of service, showing the best and worst performers on a range of measures so that customers can shop around with confidence. Coverage checkers by address will allow updates through interactive maps to offer even more comprehensive information on mobile and broadband coverage by individual address, not just postcode.

Sharon White, Ofcom Chief Executive, said: “We’re pressing ahead with the biggest shake-up of telecoms in a decade, to make sure the market is delivering the best possible services for people and business across the UK.”

Source: Ofcom 26th July 2016

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