Ofcom’s decision to avoid splitting BT from its infrastructure arm Openreach has been met with mixed reactions by network operators.
The UK regulator set forth a number of proposals to make Openreach more independent from BT but stopped short of demanding full structural separation. This decision was criticised by Three who said Ofcom failed to ‘stand up to BT’, stating that the regulator’s reforms did not go far enough.
‘We are disappointed that Ofcom has fallen short of structurally separating BT, the only measure that would have delivered genuine competition and prevented BT from favouring itself,’ a spokesperson said. ‘This is yet another example of UK regulators failing to stand up to BT after the CMA waved through its purchase of EE without any action following advice from Ofcom.
‘BT/EE now controls almost half of the vital airwaves that are used to provide a mobile phone service. Ofcom's next big decision is the upcoming auction of 2.3GHz/3.4GHz spectrum and we urge the regulator to put consumers first and prevent BT increasing its holdings at the expense of a competitive mobile market.’
TalkTalk CEO Dido Harding has long lobbied for BT Openreach to be split and called Ofcom’s decision a step in the right direction. However she accussed BT of ‘gaming the system’, claiming the reforms could see Ofcom repeat past mistakes.
‘Legal separation still means that a highly complex web of regulation, and BT has proven itself expert at gaming this system,’ she said. ‘There is nothing to suggest they will not continue to do so in the new system. Structural separation is cleaner, with less red tape – and removes BT's ability to exploit loopholes in the regulation. In taking one cautious step forward, I fear Ofcom may in practice have taken five steps back.
‘A legally separate Openreach is a step in the right direction, but we must not forget the history of the organisation. The intention ten years ago was to create a functionally separate division that served all customers equally, but that is far from what happened. The lack of clear rules and responsibilities meant that BT was (according to Ofcom) able to make £4billion in excess returns in a decade, and I fear we’re repeating the mistakes of the past.’
Voda’s vote of confidence
Vodafone’s UK CEO Jeroen Hoencamp welcomed the reforms, branding them an ‘important step forward’ to address a number of issues within BT.
‘We welcome Ofcom's recognition that the current arrangements have failed to deliver the competitive broadband infrastructure the country needs. BT has an abysmal track record in building the kind of gigabit-capable fibre-optic networks expanding rapidly across Europe and beyond, setting itself mediocre goals which it then repeatedly fails to deliver. Legal separation of Openreach from BT is an important step forward in helping to address those deficiencies.
‘Ofcom are proposing a pragmatic approach to try to rectify the flawed priorities and muddled compromises of the past, including the requirement that in future Openreach should become more responsive to its customers. It is a concern, however, that BT would still be free to choose how much it invests in the national broadband infrastructure relied upon by all of its competitors and customers.
The network has previously piled pressure on Ofcom to make a decision on Openreach. Vodafone Group CEO Vittorio Colao used a media roundtable in May to urge the regulator to think carefully about the impact of a combined BT/EE owning Openreach.