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Summary

On July 26, 2016, Ofcom announced more detailed plans on how it intends to ensure a more independent Openreach. While the regulator has fallen short of calling for a full structural separation, it does propose a model that is significantly different to the one that is in place today. The industry has until October 4, 2016 to respond and, crucially for BT, to come up with a voluntary proposal that satisfies Ofcom's aims.

A voluntary agreement, rather than an enforced one, would better deliver the intended outcome

The substance of the proposal put forward by BT to Ofcom is fairly extraordinary if you think back to when Ofcom started this review just twelve months ago. The model BT is proposing is a separate entity in all but name and should go a long way to reassure some of BT's competitors, which have found fault with the current arrangements. BT's view is that its proposal provides Ofcom with every benefit it is seeking but without any of the substantial and unavoidable costs associated with legal incorporation.

In many ways, a voluntary agreement between Ofcom and Openreach, which is backed by the rest of the industry, would achieve more than years in court and a forced enhanced model of separation could. Many of the things proposed by Ofcom, and that are being offered by BT, could be enacted within months. Attention and money could then turn to getting on with delivering what this review is ultimately all about – making sure the UK has the broadband infrastructure fit for the next decade.

Nevertheless, for some, only full structural separation will be enough, and it is important to note that Ofcom has kept this option on the table should its proposed model not deliver. Given the enormous costs and uncertainties, coupled with the weight of evidence, for Ofcom to proceed with structural separation now would be a disproportionate response, even if it could be practically delivered.

Appendix

Further reading

"A decision on Openreach is now imminent," TE0007-000995 (February 2016)

Author

Matthew Howett, Practice Leader, Regulation

matthew.howett@ovum.com

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