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Summary

On July 3, 2019, Ofcom released its first annual monitoring report on delivering a more independent Openreach. The report found that while Openreach has made good progress over the past year to stick to its voluntary commitments, much more could be done, particularly around transparency and the inappropriate sharing of information with BT.

Openreach must improve transparency and stop the inappropriate sharing of information

Back in 2017, Ofcom accepted voluntary commitments from BT to reform and legally separate Openreach from the rest of its business, with its own board, management, and staff. The commitments were designed to address competition concerns identified by Ofcom in its Strategic Review of Digital Communications. The Openreach Monitoring Unit was set up to monitor the steps taken to fulfill these commitments and assess whether they are working well. The first annual monitoring report covers the period between April 2018 and March 2019. In the report, Ofcom found that the arrangements to give Openreach greater independence from BT continue to progress well, but there is more to do.

According to the report, more focus is required to strengthen Openreach's strategic independence and engagement with customers. Openreach has introduced its own board and financial and planning processes, which are helping to increase independence, but more transparency is required of the balance between Openreach's independence and appropriate levels of BT oversight. BT is currently developing a strategic framework that will outline the scope and remit for Openreach to operate, which should help to improve transparency. There has also been a cultural change in Openreach and BT, particularly from leadership, but Ofcom's report notes that more focus is needed to make this sustainable and embedded at all levels.

The rollout of full fiber broadband is another area in which Ofcom has seen some positive improvements. The scale and pace of rollout has increased, but longer-term plans continue to be vague. This will be a problem if the UK is to achieve its broadband rollout targets. Openreach has raised its target for full-fiber connections from 3 million to 4 million premises by March 2021, and BT also announced an ambition for Openreach to reach 15 million premises by the mid-2020s. However, much more clarity is needed on how this will be achieved.

Announcing its own targets is only one part of the solution; it will also be important that Openreach works effectively with its competitors to deploy fiber networks, and this will require the development of trust between Openreach and its duct and pole access (DPA) customers. Another key concern highlighted by the report is the lack of compelling evidence of Openreach engaging and seeking to pursue co-investment initiatives put forward by providers. This is despite some providers having actively sought discussions with Openreach about co-investment opportunities. Co-investment is a key area that could help accelerate fiber rollout.

While Openreach has implemented new arrangements to give competing network providers access to BT's ducts and poles, DPA customers are still concerned about Openreach's handling of their confidential data and its ability to demonstrate "no undue discrimination." Internal committees in both Openreach and BT have published reports for the annual period to March 2019, which show the number of breaches and complaints received by the organizations. Together they reported a total of 11 breaches of their voluntary commitments. All of Openreach's breaches and the majority of BT's breaches related to information sharing. Openreach will need to demonstrate that it is treating all its customers fairly and equally by improving disclosure processes and mitigating risks relating to information sharing. For example, in an effort to prevent the inappropriate sharing of information when employees move between Openreach and BT, a solution is being implemented to prevent staff having inappropriate access to emails.

The next annual monitoring report is due in June 2020, and it is vital that Ofcom continues to closely monitor Openreach in the meantime.

Appendix

Further reading

UK (Country Regulation Overview), GLB005-000111 (December 2018)

"Ofcom announces plans for closely monitoring Openreach to ensure it sticks to its commitments”, TE0007-001169 (August 2017)

Author

Sarah McBride, Analyst, Regulation

sarah.mcbride@ovum.com

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