Ofcom announces BT Openreach split plan

November 29, 2016 | 10:26

Tags: #british-telecom #gpo #last-mile #monopoly #regulation

Companies: #bt #ofcom #openreach

Communications watchdog Ofcom has announced that it is to force BT to split from its Openreach wholesale and maintenance division, following the de facto monopoly's failure to come up with its own solutions to competition concerns.

Born from the General Post Office, which between 1912 and 1969 ran the UK's telecommunications network on behalf of the government before being floated as a public corporation and split off into Post Office and British Telecommunications divisions in 1981, BT has a de facto monopoly on 'last mile' copper provision within the UK. Barring Hull, where Kingston Communications has its own miniature fiefdom, the company stands alone in owning the copper and equipment between the switched telephone network and subscribers' houses. Following complaints that the company was abusing its position, in particular offering its own retail divisions preferential wholesale pricing and service agreements not available to rival providers, it created the Openreach management and wholesale arm in 2006.

Sadly, Ofcom claims, the formation of Openreach as a wholly-owned BT subsidiary has not gone far enough to level the playing field. 'We are disappointed that BT has not yet come forward with proposals that meet our competition concerns,' telecoms regulator Ofcom has claimed in its announcement today. 'Some progress has been made, but this has not been enough, and action is required now to deliver better outcomes for phone and broadband users.'

The result: Ofcom is to force BT to split off Openreach into a distinct company, and one which has a board formed of non-executive directors from outside BT. It will not, however, force BT to be a completely separate entity: 'Our current view is still that an effective and robust form of legal separation, with Openreach as a wholly-owned subsidiary of BT, is likely to achieve the greatest improvements for everyone in the shortest amount of time. Therefore, this is the approach with which we are minded to proceed.'

BT, which has not yet issued comment on Ofcom's findings, may be able to avoid the split: 'We remain open to further voluntary proposals from BT that address these outstanding concerns,' Ofcom explained.
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