BT – which is seeking final regulatory approval to acquire EE for £12.5 billion – could be forced to spin off its Openreach networking division under a proposal mooted by UK communications watchdog Ofcom.
The regulator is conducting one of its biggest reviews of British communications in a decade, and said it was now seeking views on whether “separating Openreach from BT could deliver competition or wider benefits to end users”, a move which would “remove BT’s underlying incentive to discriminate against competitors”.
Ofcom’s review could have ramifications to BT’s proposed tie-up with EE, which would see the company become a giant player in the mobile space. BT has repeatedly spoke of Openreach’s successes in the broadband market as a reason why the EE merger should not be rejected under anti competition laws.
When addressing the merger last month, Gavin Patterson said: “BT has shown that with its huge investment in fibre broadband that progress doesn’t have to be at the cost of competition”.
In light of Ofcom’s review, Patterson today remained defiant over Openreach in an interview with BBC radio. “The model works, we have got the most successful broadband market in Europe – that’s Ofcom data,” he said.
As part of a wider review, Ofcom said it was also considering ways to make it easier for consumers to switch between mobile services, and it will also examine converging media services, which are either offered over different platforms or in bundles by the same operator.
It said bundles sold by telecoms operators, sometimes with broadcast content, “can offer consumer benefits, but may also present risks to competition”.
CCS director of multiplay and video, Paolo Pescatore, believes the major focus of the latest review “is all about how well competition is delivering benefits to consumers and business”, but believes a full separation of Openreach is unlikely.
“It is especially interesting that Ofcom has chosen to conduct this review as we move towards two major acquisitions that will change the UK multiplay market,” Pescatore said. “We expect a formal conclusion to the review by the end of the year.”
Rivals Sky and TalkTalk in the fixed space have called for Ofcom to establish an independent operator of the country’s fibre broadband and copper network for years, and Sky today welcomed the decision in a statement.
“It is welcome news that Ofcom is putting the future of Openreach at the centre of its review,” said Mai Fyfield, Sky’s chief strategy officer. “For too long, consumers and businesses have been suffering because the existing structure does not deliver the innovation, competition and quality of service that they need.”