BT and Openreach split

14 · MAR ·2017

Ofcom and BT have finally reached agreement on the separation of Openreach today. After 2 years of discussions, a decision has been made to legally separate the two companies. They key details are as follows:

- Openreach will operate as a separate entity with its own staff, management and strategy

- 34,000 staff will move from BT to Openreach under TUPE

- Openreach will have to consult with its customers, which include the likes of Sky, TalkTalk, Vodafone on investments and "serve all of its customers equally”

- Connectivity operators will have access to the group’s underground cables and telegraph poles.

- BT will still own Openreach.

Why have the changes been made and what will it mean?

For a number of years, Ofcom has been considering splitting Openreach from BT due to concerns over industry monopoly, favouritism and poor service. Recent grilling’s from the public accounts committee over the slow rollout of superfast broadband, pricing and restriction of access to infrastructure information, as well as last summer’s allegations that BT has been using Openreach profits to fund its BT Sport contract, have further increased demands for separation.

Ofcom boss Sharon White told BBC Radio 4's Today programme that "we can now expect better service from Openreach’, and heralding the agreement as a ’significant day’ for phone and broadband users. Sky, TalkTalk and Vodafone have all released similar statements that commend the move as encouraging start but with demands for releases of clear timetables for progress. While the move has fallen short of forcing BT to sell off Openreach, most critics accept that the ensuing legal battle that would likely have commenced from such action may have only served to slow down the progress of superfast broadband at a crucial time for the UK economy.

So what will change?

The most significant impact is likely to be from the greater visibility and reduced cost of access that carrier operators will have over Openreach’s underground cables and telephone poles. This should allow for alternative providers to invest more freely and effectively in future broadband projects, while the agreement that BT will have to consult with their largest customers on their own projects should create an environment where ‘overbuild’ is less prominent.

“The changes within Openreach will allow BT to work better,” says Piers Daniell, Chief Executive Officer at FluidOne; “the individual businesses within the BT group will actually be deregulated in the way they interact with Openreach resulting in a better service than they’ve been able to get through regulation.”

Entering a world of engineer companies that will now become their competition rather than just subcontracts may further help drive improvements.

The UK currently sits in the average broadband speed rankings, while some rural areas struggle with sub 2 Mb/s speeds. Whether the changes will have a significant impact on progress in this area is debatable. BT Group still has a remit to bring ‘superfast’ broadband to the UK through existing BDUK agreements and there is no guarantee that funding will increase under the new agreement.

Likewise, even with BT’s rivals having more open access to Openreach infrastructure their plans will likely focus on investments which deliver a strong return, so while this will improve choice and options for the consumer, it won’t necessarily address issues in rural areas.

What about delivery?

It means that the industry will go through an unsettled period while we all work out what this means. The future is looking exciting for delivery and fixing – favouritism for particular customers will begin to dissolve, meaning development of a better standard across the entire industry.

Missed appointments may become a thing of the past through engineer tracking, potentially resulting in the end of third party delays.

They will also have to ensure that they are properly resourced, and skilled to complete the job, as any business would and in doing so could improvements now be made elsewhere, such as systems and communications.

Going forward businesses may now have to pay for Openreach, but in doing so will have greater flexibility on service and delivery – resulting in tasks completed at a suitable time for the customer. Could this lead to affordable true fibre being delivered to the home?

In the long term we could even start to see providers such as TalkTalk Business bring their own engineer team to the market, which could add a whole new wave of competition and delivery improvements.

Questions remain

There are, of course, outstanding questions, for example, will the labour force become less unionised and what, if any, Ofcom regulations apply Openreach as opposed to BTOR?

“We would probably have liked to see a complete separation,” adds Simon Stokes, Head of Channel at FluidOne: “but it’s certainly a step in the right direction. Fortunately, we are seeing a growth in alternative networks across the UK and having Openreach as a separate body allows for a more competitive environment for the industry to exist in.

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Posted by Dan Pope