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UPDATE Sky Demand Ofcom Open UK Competition Inquiry into BT Openreach

Monday, Jun 29th, 2015 (8:24 am) - Score 2,531

Sky (Sky Broadband) has used the backdrop of Ofcom’s on-going strategic review of the UK’s digital communications market to formally demand that the national telecoms regulator launch a competition review of BTOpenreach, which manages BT’s underlying broadband and phone infrastructure.

The major Strategic Review was officially launched in March (here) and the last time Ofcom ran one of those, which was around ten years ago, it resulted in the creation of Openreach as part of a “functional separation” from the BT whole.

A rush of other changes came with Openreach, such as Local Loop Unbundling (LLU) that is often credited with opening the broadband and phone market up through cheaper / better services by giving rival ISPs access to install their own kit inside BT’s infrastructure (telephone exchanges).

But ten years on and many of BT’s key rivals continue to complain that the operator has too much hold over the telecoms market, particularly the big boys of TalkTalk and Sky Broadband that are broadly dependent upon Openreach’s infrastructure for their own services.

TalkTalk has often complained that the prices for FTTC (VULA) “fibre broadband” are too high, yet Ofcom last year rejected such a complaint (here); although they did later impose a new “margin squeeze” test to balance the concerns (here). TalkTalk also wants to see Openreach being completely separated from BT.

In that sense it’s little surprise to find that Sky has similarly chosen now as the time to request a formal competition inquiry into Openreach, with Sky complaining that the telecoms giant is “failing” broadband consumers and not investing enough into their underlying infrastructure.

Key Findings from Sky’s Submission
• More than 90% of new line installations, which require an Openreach engineer to attend, take 10 calendar days or longer. Almost one in ten installations takes longer than 30 days.
• Openreach changes the agreed installation date for Sky customers on average around 36,000 times a month.
• Openreach misses over 5002 appointments each month to install new lines for Sky customers and fails to complete a further 4,000 jobs per month.
• Fault rates across Openreach’s network increased by 50% between 2009 and 2012, the last year for which reliable data is publicly available.
• Openreach’s performance in fixing faults is consistently below the targets set out in agreements with service providers.

Some of the above examples won’t come as much of a surprise to ISPs in this industry, although consumers who rarely see such information may feel more illuminated.

Mai Fyfield, Sky’s Chief Strategy Officer, said:

We are drawing attention to the problems in broadband because they are important to the economy as a whole. They affect competition between providers and have a direct impact on consumers and small businesses, resulting in inconvenience, dissatisfaction and loss of productivity. The UK needs to get the basics right in broadband as well as develop the networks and services of the future.

We believe that Ofcom should move quickly to ask the Competition and Markets Authority (CMA) to undertake a full competition inquiry. A reference to the CMA would allow these vital issues to be examined with increased speed and thoroughness by a body with the powers to take whatever action should be deemed necessary. Given the rapid changes taking place in the sector, we believe this should happen as soon as possible.”

On top of that Sky complains that BT has not invested enough into Openreach and they thus want the division to be completely separated from BT, which is something that a spokesperson for BT was quick to say “would lead to huge uncertainty and fundamentally undermine the case for future investment“. BT also described Sky’s complaint as “disappointing” and accused the operator of engaging in “selective spin rather than constructive dialogue.”

Admittedly it’s a lot easier to moan at Openreach about a lack of investment, assuming you can ignore the £2-3bn commercial and BDUK based roll-out of FTTC/P or other evolutions like G.fast etc., when you’re not tasked with having to make the same commitments yourself (note: we’re not sure exactly how much was ultimately spent on the purely commercial FTTC project).

Happily Sky and TalkTalk are very slowly rolling out their own FTTH/P network in York, which may eventually expand into two more UK cities, but this is very much an experimental investment and not yet a project of truly national scale. Indeed it’s not clear if either could easily find the money to develop such a network across the UK, particular given future competition from BT’s G.fast and Virgin Media’s cable network in many of the same areas.

It’s also unclear whether the total separation of Openreach would be the magic pill that so many assume, particularly on the investment and engineering side. Indeed it’s just as possible that the situation may get worse rather than better, which is why it’s so important for Ofcom to carefully weigh all of the possible ramifications before announcing a decision.

Never the less BT’s huge investment into TV content and now Mobile is certainly putting some additional pressure on the operators rivals, which are in-turn responding with more market consolidation of their own and increasing pressure on Ofcom to help maintain a level playing field.

But Ofcom’s new CEO, Sharon White, has already hinted that she would prefer a “lighter approach” to regulation and those aren’t the words you’d use when planning for the total separation of Openreach from BT (here). On the other hand the regulator recently proposed to open up BT’s Dark Fibre network to rivals (here), which seems like the opposite of a lighter approach.

In any case Ofcom’s strategic review is imminently about to conclude its initial evidence gathering phase and then the first proposals for change should surface by the end of 2015. No doubt Sky’s formal complaint will play a part in their approach, but it’s too early to say how much of an impact it might have.

UPDATE 12:22pm

Sky’s full complaint can be downloaded here.

UPDATE 1:04pm

Added some more details above from Sky’s official response.

Mark-Jackson
By Mark Jackson
Mark is a professional technology writer, IT consultant and computer engineer from Dorset (England), he also founded ISPreview in 1999 and enjoys analysing the latest telecoms and broadband developments. Find me on X (Twitter), Mastodon, Facebook and .
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