Analysts Unsurprised At Ofcom Decision Not To Split BT Openreach

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ANALYSIS: Telecoms experts say it was never likely Ofcom would liberate Openreach but warn its last chance saloon for BT and rivals might not benefit

While BT’s rivals fume at Ofcom’s decision not to make Openreach fully independent, experts are a bit more balanced in their assessment of the regulator’s proposals.

Most are unsurprised at the decision to recommend the creation of an independent board and chief executive and say it has done everything except call for formal separation.

However there are concerns not enough change will take place and that Ofcom might be left with no alternative in the future.

Dan Howdle, Cable.co.uk telecoms expert

BT Cumbria Fell End fibre broadband“This move is clearly the first in a multi-stage process toward severing Openreach from the BT Group completely. If permanent separation were to happen, existing staff would need to be reassigned, a new board appointed, budgets allotted, and it would need to become discreet owner of its existing infrastructural assets – all of which is exactly what is happening today. Full separation is now inevitable.”

Kester Mann, operators analyst at CCS Insight

“Ofcom’s proposals are about as radical and stringent as they could have been without taking the ultimate step to structurally separate Openreach from BT.

“The decision not to force BT to split Openreach comes as little surprise. It would have been the most controversial action the regulator could have taken and would still not have offered guaranteed improvements for customers. Indeed, the time to implement, associated costs and market disruption – potentially leading to years of legal battles – would have threatened short-term infrastructure investment.

“Inevitably, BT’s rivals will criticise Ofcom for being too lenient. But although they campaigned hard for formal independence, today’s outcome still represents a partial victory. Structural separation was always a long-shot and companies such as Sky and TalkTalk will stand to benefit from greater infrastructure investment, customer service and independence.”

Richard Neudegg, uSwitch head of regulation

“A complete separation of Openreach and BT has been put on the back-burner – for now at least. The regulator has given it the chance to make improvements to avoid potentially losing Openreach forever.

“Quite frankly, consumers – too many of whom are familiar with delays incurred by Openreach even when BT isn’t their retail provider – don’t care how it’s done. They just want and deserve a better service.

“With today’s proposals on more independence for Openreach within BT Group, Ofcom is trying to give the network-arm more incentive to invest its money in the right places and boost other providers’ ability to compete on more aspects of broadband service. BT Group needs to get on with delivering some progress, and fast. We’ve seen Ofcom and Government state clearly if we don’t see significant improvements, other options need to be considered.”

Fiona Keenan, strategic insight director at Kantar Worldpanel

cloud“Today’s decision from Ofcom is certainly a step change for the UK telecoms market.  The proposed reforms should go far in fostering a more consultative, transparent approach to infrastructure development, as well as increasing investment.

“It should also suppress concerns from other providers who have always felt that BT’s control over Openreach has stymied their growth.  Coinciding as it does with wider changes in network quality targets and new rules to make switching providers easier, Ofcom’s decision should usher in positive changes for the consumer.

“The question is how long it will take to implement these changes and whether the impact will be as far-reaching as Ofcom seems to expect. The likes of Sky and TalkTalk have long been using the problematic status of Openreach as a free pass to explain their own shortcomings, but that’s not the whole story. Whether ultimately we’ll see cheaper and faster broadband for the general public remains to be seen.”

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