Ofcom is pushing ahead with a plan to legally separate BT from its Openreach infrastructure arm, stating it was “disappointed that BT has not yet come forward with proposals that meet our competition concerns”.
Openreach is the part of BT which develops and maintains the UK’s main telecoms network, which is also used by providers such as Sky and Vodafone as well as BT’s retail business. Ofcom is looking to ensure fair play in Openreach’s dealings with all stakeholders, despite its ties to its owner.
The UK watchdog said “creating a more independent Openreach – which works in the interest of all providers, not just BT – is an important part of achieving this”.
Ofcom has been looking at BT’s relationship with Openreach – including whether there is discrimination against competitors – for some time. It has stopped short of calling for a full, structural separation with different ownership, because responses to a consultation argued that this “could generate materially greater costs and risks compared to models based on legal separation”.
BT said that it put forward proposals in July it believes are “fair and sustainable”, and meet Ofcom’s objectives without disproportionate costs. It said it is “in discussions with Ofcom on two outstanding issues” – the reporting line of the Openreach CEO and the form of legal incorporation.
Ofcom said that BT’s proposals fell short in areas including “the transfer of people and assets, and the level of influence that BT executives could exert over the management of Openreach”.
Helen Lamprell, director of external affairs at Vodafone UK, said: “We believe Openreach needs to be a standalone business headed by a truly independent board of directors bound by statutory duties to treat customers equally and give a true and accurate view of Openreach’s underlying assets, costs and profit. Only then would it be a simpler and more transparent business for Ofcom to regulate.”
Ofcom said it “remains open” to further voluntary proposals from BT. But it is now preparing a notification to the European Commission to require the changes to Openreach’s independence.
It said it has already discussed the plan with the European authorities, and expects to publicly consult on its submission early next year.
First Openreach chairman
Separately, BT announced the appointment of industry veteran Mike McTighe as the first chairman of Openreach. It described him as “an experienced telecoms executive and regulator who spent eight years on the board of Ofcom,” and McTighe will also be “instrumental” in selecting further members of the new Openreach board – which will operate from early next year.
BT is also coming under pressure in the area of spectrum, following its acquisition of the UK’s biggest operator, EE. Smaller rival 3 UK has kicked-off a public campaign arguing for spectrum caps, ahead of a spectrum auction next year – and some restrictions have already been placed on BT.