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BT Rivals Sky, TalkTalk and Voda Push 10 Point Plan for a Better Openreach

Monday, May 16th, 2016 (8:02 am) - Score 1,477

A new “all-industry coalition“, which represents alternative network providers and major UK players like Sky Broadband, TalkTalk and Vodafone, has today put pressure on Ofcom to deliver on its Strategic Review by publishing a plan that sets out how they think the regulator should deliver a better and more independent Openreach.

Openreach, which is responsible for maintaining and upgrading BT’s national UK telecoms and broadband network, is intended to be “functionally separate” from BT so as to treat competitors fairly. But Ofcom’s review found that the organisation “still has an incentive to make decisions in the interests of BT, rather than BT’s competitors, which can lead to competition problems.

The strategic review thus pledged to deliver a number of key changes, such as requiring Openreach to give rivals better access to its cable ducts and poles (full details), a much more independent governance structure, tougher minimum service requirements and better information sharing. Ofcom has separately also proposed to give rivals more access to harness BT’s Dark Fibre network (here).

Since then Ofcom and BT have been locked in a battle over how best to implement these changes, with the telecoms giant being particularly concerned about the changes to Openreach’s governance structure. The regulator is also known to be keeping the tedious option of splitting Openreach from BT’s control on the table as a bargaining chip, while BT has countered by offering to expand ultrafast FTTP broadband connectivity (here) and to support the proposed 10Mbps Universal Service Obligation (USO).

Naturally the new “all-industry coalition” hopes to influence this debate and that’s where it’s new 10 point plan comes in.

Chris Pateman, CEO of the Federation of Communication Services, said:

“Frankly, FCS was disappointed Ofcom’s review of digital communications stopped short of recommending the complete structural separation of Openreach from the BT Group. Ofcom believe improvements can be delivered without the hassle and delays of a full separation: our 10 point plan represents the industry’s proposals on how this can be accomplished.

Importantly, as our plan makes clear, we believe this can be accomplished swiftly and cost-effectively, using well-proven corporate governance principles. And it can be benchmarked against experience from other regulated utilities, both in the UK and overseas.

We are throwing down a challenge, underpinned by sound research and experience. A challenge to Ofcom, Openreach and the industry to work together to shape the future for the good of all market players and all customers.”

Andrew Griffith, Sky Group COO and CFO, said:

“To help OFCOM deliver its goal of a more independent Openreach we’ve put forward a practical set of proposals based on tried and tested regulation of other utilities and established company law. These proposals can be implemented quickly and will deliver a much needed step-change in the performance of Openreach for millions of consumers and businesses across the UK.”

However the coalition itself doesn’t actually represent the whole industry because there are some big names missing from the list of signatories, not least of them being Zayo, KC and Virgin Media, all of which have previously expressed reservations about the regulator’s Dark Fibre policy (here and here) and have their own sizeable corners of the infrastructure market to protect from regulatory pressures.

The Open Letter in Full

Dear [Sharon White – CEO of Ofcom],

We are an industry coalition comprising Sky, TalkTalk, Vodafone, the Independent Networks Cooperative Association (INCA) and the Federation of Communication Services (FCS). Together we represent the interests of the majority of consumers and businesses that rely on Openreach, serving millions of broadband customers and spending billions each year on the national network. We represent the builders and operators of the UK’s next generation digital networks, as well as companies which deliver communications solutions to hundreds and thousands of organisations both big and small.

In February, Ofcom’s Digital Communications Review concluded that reforming Openreach is critical to improving Britain’s telecoms market. Although it stated that separation of Openreach from BT Group is “the cleanest and most clear-cut long-term solution”, Ofcom indicated that it would first explore other options that might deliver the necessary changes with less disruption. Ofcom is therefore considering how to create a more independent and customer-centric Openreach within BT Group. We are pleased that Ofcom is committed to an open, transparent and inclusive approach to this reform process, rather than a closed door negotiation with BT. We are therefore writing to set out our vision of how Ofcom can deliver its objectives.

We agree with Ofcom’s conclusion that the status quo cannot be allowed to continue over the next ten years given the critical importance of the UK’s digital communications infrastructure. The national network has to be able to deliver the world class connectivity that Britain needs, enabling a dynamic market where all industry players can invest and compete on a level playing field. We also agree with the UK Government when it stated that “the current relationship between BT and Openreach will not deliver the country’s needs for more competition, better innovation and better service”, and note that it urged Ofcom to take “whatever action is needed” to achieve this.

In light of this, we are publishing this coalition’s ’10 Point Plan for a Better Openreach’, a programme which, if implemented in full, should deliver on Ofcom’s vision. This plan contains a series of proposals aimed at reforming Openreach. It reflects best practice as outlined in the UK Corporate Governance Code and the proposals have also been drawn from a number of proven approaches in other UK sectors including the energy, civil aviation and water markets,as well as elsewhere around the world. Our proposals are grouped into three broad areas:

Reforming Openreach’s governance so it can act independently

Giving Openreach clear purpose and accountability by:

1. Establishing Openreach as a legally separate company

2. Creating an independent Openreach Board

3. Creating an independent body to oversee the transition and act as an adjudicator

Giving Openreach the tools it needs to succeed

Creating a confident and ambitious Openreach that has the autonomy to plan for the future by:

4. Giving Openreach full control and ownership of its assets

5. Ensuring Openreach has its own standalone corporate identity and brand

6. Allowing Openreach to be financially independent and make its own investment decisions

Creating an Openreach that delivers for all

Making sure that Openreach serves the whole market fairly to improve choice, value and quality for its customers by:

7. Providing all Openreach services on the same basis, no matter the customer

8. Ensuring that Openreach consults with all of its customers about its future strategy and proposed investments

9. Introducing competition to Openreach by making BT Consumer’s procurement truly contestable

10. Ensuring that Openreach does not inhibit investment by independent network operators

If implemented in full, these reforms should deliver the step-change in effectiveness that customers need and remove barriers to a competitive market. The measures we have proposed are not controversial or drastic, but reflect arrangements which are commonplace for large listed companies. Our proposals are straightforward, simple, and can be achieved quickly and cost effectively.

We are committed to helping Ofcom achieve its goal of a more independent and responsive Openreach to the benefit of consumers. Reform is crucial to delivering the improved digital connectivity Britain needs. We believe that our plan is a vital step in achieving that vision.

Yours sincerely,

Jeremy Darroch, Group CEO, Sky

Dido Harding, CEO, TalkTalk

Jeroen Hoencamp, CEO, Vodafone UK

Malcolm Corbett, CEO, Independent Networks Cooperative Association

Chris Pateman, CEO, Federation of Communication Services

Many aspects of the above recommendations may yet come to pass once Ofcom has reached a final agreement, assuming BT is willing to do so voluntarily and that’s still a matter for debate. However when taken together the 10-point plan does read a lot like the complete separation of Openreach from BT’s control, albeit somewhat by the regulatory backdoor of policy making.

Ofcom would perhaps prefer not to go that far and thus avoid any complicated legal challenges, delays or tangling with Europe’s competition policy (the EU isn’t completely sold on the idea of separating incumbents from their networks), but they haven’t closed the door on such an approach either. We do expect to see a much more independent Openreach in the near future, but it may not be quite as separate as the above coalition would hope.

We’ve shot off a message to BT and hope to report back with their comment shortly. In the meantime you read a breakdown of the 10 proposals.

UPDATE 8:34am

A BT Spokesperson told ISPreview.co.uk, “We at BT are in talks with Ofcom, discussing constructive ideas to further enhance the independence of Openreach from the rest of BT Group. Key suggestions made by other companies today seem incompatible with the legal responsibility that the Board of any listed company has when it comes to stewarding shareholders’ money responsibly.

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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 Twitter, , Facebook and Linkedin.
Leave a Comment
18 Responses
  1. Avatar New_Londoner says:

    I see two problems with the letter: firstly it would require Ofcom to act beyond its regulatory powers; secondly it is from a group with a mainly lamentable track record of investing in UK infrastructure. Apart from that it’s fine. 😉

    1. Avatar Tempest3K says:

      I’d think 9 & 10 might help address your second point – if BT are forced to go to the market instead of defaulting to OR, that would hopefully encourage the investment you mention

    2. Avatar Steve Jones says:

      @Tempest3K

      So BT COnsumer would be forced to tender its network requirements? That’s clearly bonkers. It would just introduce a lot of costs to BT Consumer to very little avail. It just smacks of trying to handicap BT COnsumer into jumping through lots of unnecessary hoops. It would be difficult to make a commercial case for this given the costs involved of integration. Witness that neither Sky or TalkTalk have bothered to support FTTP yet.

      Also this quote from The Telegraph (which I saw in Sunday’s paper)

      “In its current form Openreach is meant to treat all retailers, including BT, equally. However, rivals recently complained that they had not been informed about the launch of a new 52 megabits per second service developed by Openreach, allowing BT to be the only provider at launch.”

      http://www.telegraph.co.uk/business/2016/05/14/bt-rivals-call-ofcom-over-independence-for-openreach/

      This is clearly disingenuous. This very site reported on the new Openreach product in December. The wholesale release was in January and BT Consumer didn’t release their retail product for almost five months after the announcement. In any event, OR had released 40/2 products for other ISPs (like TalkTalk) which BT Consumer hadn’t picked up on release.

      http://www.ispreview.co.uk/index.php/2015/12/bt-openreach-launch-new-55mbps-fttc-and-fttp-broadband-product.html

    3. Mark Jackson Mark Jackson says:

      The 55Mbps (52Mbps via BT) product is a comical one as ISPs were clearly aware, we even asked many of them about it 🙂 .

      http://www.ispreview.co.uk/index.php/2016/01/uk-isps-muted-on-support-for-openreachs-55mbps-fttc-product.html

  2. Avatar TheManStan says:

    What they are requesting is full separation in all but name…

    And points 9 and 10 are ludicrous…

    BT Consumer is not tightly regulated per se (much like the the letter writers), what the writers would like to see is BT hobbled at all levels of business by tight regulation, making the BT less competitive and there is only one set of businesses which will benefit…

    point 10 is so vague in meaning that it is pointless…

    1. Avatar GNewton says:

      It would indeed be good to see this true:

      – Reforming Openreach’s governance so it can act independently
      – Giving Openreach the tools it needs to succeed

      However, points 9) and 10) doesn’t quite make sense to me. How does Openreach inhibit investment by independent network operators? Wasn’t it the BDUK which often prevented independent network builders from following through with alternative projects, because of this state funded competition?

  3. Avatar dragoneast says:

    I assume it’s a tactical intervention to “keep the pressure up”, on Ofcom; and everyone knows it. Nothing new, and nothing for the consumer.

    I’m just really amused that we seem to have created a modern “competition” that is as dependent on the State’s interference as the nationalised industries ever were.

    The Regulation game = pulling the wool over everyone’s eyes.

  4. Avatar MikeW says:

    Well, if you had been calling for full separation prior to the DCR result, and had the ability to send input Ofcom’s way post-DCR, wouldn’t you set out a checklist that pushed all the individual items of separation?

    In the meantime, love the photo that comes with the article…

    1. Avatar Gadget says:

      shades of Nicholas Cage’s “Rocket man” line in “The Rock”

  5. Avatar karl says:

    Is there a reason any response from BT on a BT news item on here is nearly always from a “spokesperson” rather than anyone by actual name???

    Every other ISP that has a direct response to a news item it seems is 99% of the time by name from someone in their organisation.

    1. Mark Jackson Mark Jackson says:

      It’s standard industry practice when the statement comes from a PR department rather than a specific individual of more senior position and the same approach is often used by the other major providers, so hardly unique to BT.. it’s very common. If the response came from BT’s CEO then we’d name the CEO, but it didn’t.

    2. Avatar karl says:

      Its a shame most responses seem to come from BTs PR department rather than anyone of any significance within the organisation. I had not really noticed until today.

      “the same approach is often used by the other major providers, so hardly unique to BT.. it’s very common.”

      We will have to agree to disagree, looking through the past 10 or so stories specific to each of the big names IE Talk Talk, BT, Virgin, Sky most of them apart from BT they have a response of some description from a CEO/COO, Techincal officer or similar senior position.

      Not always the case i agree but it seems all those big players more often than not will respond in some fashion with someone much higher in the company than some nameless and faceless PR (often spin) person. I wonder why BT rarely do when others even for minor stories do.

    3. Avatar Steve Jones says:

      CEOs and other senior figures have long learned the dangers of an instant response. So what you’ll get at this stage is a response from a PR department. Later will come the formal response after it’s been discussed. There will no doubt be different views on how to respond. This stuff is actually rather important.

      Incidentally, there is one implication of Sky and TalkTalk’s direction and that is, like Railtrack, OR should be considered primarily as a non-profit making public service and not a commercial organisation owned by the shareholders. I think if OR was driven down that route with the sort of constraints Sky & TalkTalk want, then just maybe BT would look to divest itself of the fixed line network (loaded with as much debt and liability as possible of course. Quite what Ofcom might make of that would be interesting.

    4. Avatar karl says:

      “CEOs and other senior figures have long learned the dangers of an instant response.”

      A fair and understandable comment.

      “So what you’ll get at this stage is a response from a PR department. Later will come the formal response after it’s been discussed. There will no doubt be different views on how to respond. This stuff is actually rather important.”

      So what you are saying is the PR department just say whatever they want? That is sheer madness.

      Regarding the Railtrack comparison i seriously doubt you would want Openreach treated like Railtrack and fined millions every time they are late delivering something 😉

  6. Avatar FibreFred says:

    More got air from BT’s worried competition, they must be doing something right to cause such a flap.

    At times it has a striking resemblance to kids in a nursery shouting “I want what he has and I want it now” pathetic 🙂

  7. Avatar Al says:

    No doubt this is in the best interest of their shareholders rather than us poor consumers, After all it was all about the consumers all exchanges would have been unbundled by now. After all to quote them

    If implemented in full, these reforms should deliver the step-change in effectiveness that customers need and remove barriers to a competitive market.

    If you are served by an non-LLU exchange you don’t have a competive market, so how do Sky TT plan on brining competition to those exchanges which haven’t been unbundled? Perhaps Ofcom should pass regulation that ISP’s can no longer discriminate against those on non-LLU exchanges and have to charge the same as those on LLU exchanges (which BT do).

    1. Avatar FibreFred says:

      Nothing at all to do with consumers this, not one iota, purely about trying to hobble BT and increase their own market share/profits etc.

      Plus none of this is actually needed as TalkTalk will be rolling out FTTP to 10 millions households so they can sell this to Sky/Voda/Others but also ensure they comply with their own point 10) and “do not inhibit investment by independent network operators” 😉

      Call Ofcom what you will, but they aren’t stupid, they will see this for exactly what it is.

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