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U.K. regulator reserves right to force spin-off of incumbent’s access arm at a later date; BT says it is happy to open its ducts and poles to rivals.
BT had cause for celebration on Thursday as Ofcom ruled that it does not have to structurally separate from its Openreach access network arm.
However, the U.K. telecoms regulator ordered changes to Openreach’s governance and required the company to open up its physical network to competitors. It also reserved the right to force a separation at a later date, should it deem such a move necessary.
Presenting the initial conclusions of its strategic review of the U.K. market, Ofcom noted that Openreach still has the incentive to make decisions in the interests of its parent company rather than competing players, which can affect competition in the market. Its governance lacks independence from BT, with the telco retaining control of its decision-making and investment plans, without consulting rival players on investment decisions that affect them, it said.
"For these reasons, Ofcom has decided it is necessary to overhaul Openreach’s governance and strengthen its independence from BT. In future, Openreach needs to take its own decisions on budget, investment and strategy – such as the deployment of new networks," the regulator said.
Openreach will be required to open up its ducts and poles to rival operators, enabling them to build their own fibre-to-the-premises (FTTP) networks, Ofcom said.
It must also make it much easier for competitors to access its network, providing comprehensive data on the nature and location of the ducts and poles.
Openreach must also consult competitors on its investment plans and offer greater transparency when it comes to the allocation of costs and assets between itself and the rest of BT.
Ofcom said it will prepare detailed proposals later in the year on how those changes should be implemented.
"The new model might require Openreach to become a ring-fenced, ‘wholly-owned subsidiary’ of BT Group, with its own purpose and board members," the regulator said. "If necessary, Ofcom reserves the right to require BT to spin off Openreach as an entirely separate legal entity, with its own shareholders."
BT is determined that that should not happen.
The U.K. incumbent said it has submitted a proposal to Ofcom suggesting a new governance structure for Openreach and a clear commitment on investment.
"Openreach is already one of the most heavily regulated businesses in the world but we have volunteered to accept tighter regulation to bring matters to a clear and speedy conclusion," BT said.
"We are happy to let other companies use our ducts and poles if they are genuinely keen to invest very large sums as we have done," it added. "Our ducts and poles have been open to competitors since 2009 but there has been little very interest to date. We will see if that now changes."
