Ofcom update on Openreach’s independence is not an inspiring read

News

Ofcom states there is “No room for complacency” – something of an understatement, given BT was privatised in 1984 as step towards introducing competition to the UK, writes Annie Turner.

To find the UK regulator talking about making “good progress” about the independence of BT’s wholesale access unit 36 years later is absurd. Yes, yes, a different legal entity is might be, but ultimately it is has the same ownership.

Ofcom notes in this report that:

“Some industry stakeholders have continued to raise their concerns about the potential for undue BT Group influence over Openreach pricing decisions. We also note some concerns around coincidences of timing of Openreach fibre deployment in certain locations where communication providers’ (‘providers’) build footprints overlap.

“While these have been raised as concerns, we have to date not found anything that would suggest that Openreach is not acting in accordance with the Commitments. These will continue to be particular areas of focus for our monitoring in the year ahead.”

Missed opportunities

Imagine. The entire separation from BT – spinning it off from BT without BT retaining a controlling stake – is in my view was the only foolproof way to ensure Openreach’s 100% impartiality in the way it treats all service providers. Ofcom even chickened out of that, after years and years of complaints by rivals.

The second best option would have been a fairer regulatory framework that was better policed. This is tricky, complicated and expensive though, as the financial crash of 2008 illustrated – none of the financial authorities nor the ratings agencies had seen that coming.

Had Ofcom gone for either of these options, the UK’s digital infrastructure would not be in the laggard position it is today – almost at the bottom of the European table of fibre penetration.

That it has the company of Germany and Italy, two of the other four biggest economies is of little consolation and provides no excuse – check out Spain, which suffered horribly after the financial crash. France (other of the big four) saw the light a couple of years ago, and has been making its way up the ranking ever since.

Connecitivty is crucial

A welcome silver lining of the darkness of the pandemic is that finally, the importance of connectivity is understood – although it had been only too well grasped by those without it who were largely ignored – and now there is a mad scramble to close the digital divide.

Better late than never, I suppose, but entire regions, as well as families, businesses and individuals have suffered a decade or more of disadvantage and deprivation in the meantime. My “broadband” and that in my entire neighbourhood was too slow to undertake a speed test, while BT squandered billions on broadcasting rights for football (which it failed to recoup) and was accused of obstructing other companies in their efforts to roll out infrastructure where BT had no interest in doing so.

Unedifying performance

At the FTTH Council event in spring 2019, I witnessed the unedifying spectacle of Michael Sherman, Chief Strategy & Transformation Officer, BT Group, telling Greg Mesch, Chief Executive Officer, CityFibre, that his company would put Mesch’s out of business in a panel debate. It was certainly the most lively I've ever seen.

It was at that event that the FTTC Council Europe released it latest rankings and for the first time, the UK had breached the 1% penetration barrier required for inclusion. The Council was at pains to point out this had been achieved mostly by the efforts of alternative fibre providers such as CityFibre: BT was still arguing the case for fibre to the cabinet.

It was interesting to read the Reuters report that quoted BT’s CEO Philip Jansen saying selling a stake in Openreach might be an option depending on Ofcom's regulation regarding fibre next spring. There have been signs BT is not going to like what it sees.

Here's where we are now

Still, I risk being accused of negativity and dwelling on history when progress has been made, so here’s the good news, according to Ofcom. Bunting at the ready:

“BT has increased its full-fibre rollout ambitions to reach 20 million premises by the mid to late 2020s and Openreach’s FTTP deployment is continuing at scale and pace across the UK enabled by significant BT investment.

“Beneath the surface of the stated ambitions, we have seen that Openreach independently worked up its commercial business case which was scrutinised and challenged by BT Group through established governance processes before the final investment decision was made.

Still, Ofcom found that, “Industry feedback generally shows Openreach is improving its engagement with its wholesale customers in many areas – developing its independent identity and building and maintaining constructive commercial relationships.

We note the commitment of the Openreach CEO and senior leadership team as a key factor in this progress. However, some feedback indicates that not all stakeholders think the separation between BT and Openreach is working as they consider it should. We welcome Openreach’s work with providers on this and the progress made.

This is a complex challenge and we note Openreach commitment to making physical infrastructure access (‘PIA’) work. However, there have been ‘growing pains’ [sic] in the implementation of PIA, and we believe Openreach will need to do more to ensure providers can gain access at the scale and pace necessary to support the deployment of multiple, fast fibre networks for UK consumers.

Openreach continues to engage with its PIA customers and provides updates at a regular roundtable meetings of industry CEOs, chaired by Ofcom.”

You can read the full document here.