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Ofcom to consult on splitting Openreach from BT

Thursday, July 16th 2015 by Phil Wilkinson-Jones

Ofcom is investigating whether Openreach, which owns and maintains the UK’s largest broadband network, should be separated from BT.

Deciding on the future of Openreach forms a key part of Ofcom’s digital communications review – an overarching review of the UK’s fixed and wireless networks to make sure they work for consumers.

In a statement released today, the telecoms regulator said separating Openreach from BT would simplify existing regulation and “remove BT’s underlying incentive to discriminate against competitors”.

However, it said the process would be challenging and may not address issues such as service quality and investment decisions.

Other options include retaining the current model, where Openreach operates as ‘functionally separate’ from BT and provides equal access to its network to competing providers.

Ofcom said the current model could be strengthened by imposing stricter controls on BT’s wholesale practices and by using stronger incentives – or tougher penalties – to improve quality of service.

The fourth option that Ofcom will consult on is deregulation, which it says would encourage competition between BT and providers such as Virgin Media, Hyperoptic and Gigaclear, which build their own infrastructure and do not use the Openreach network at all.

Ofcom said this could incentivise Openreach to improve its infrastructure but could lead to a lack of competition and duplication of networks.

'Everyone benefits'

Sharon White, Ofcom’s CEO, said: “This review is about ensuring people get the best possible communications services, wherever they live and work.

“Our priorities are clear. We want to promote competition, investment and innovation, so that everyone benefits from even better coverage, choice, price and quality of service in years to come.”

Other issues Ofcom will be consulting on as part of its review include the rollout of superfast broadband, which it says has reached 83% of UK premises.

It will also look at the 8% of households that cannot access internet speeds of 10Mbps, which it says is necessary to use services such as TV on demand.

The review will also look at the UK’s 4G coverage, which is available to 42% of premises from all four providers – O2, Vodafone, Three and EE – and to 90% from at least one.

4G is expected to reach 98% of premises thanks to £5bn of industry investment, but Ofcom says it will consider the implications of recent trends towards consolidation.

Hutchison Whampoa, which owns Three, is in talks to buy O2 while BT’s takeover of EE is being investigated by the Competition and Markets Authority.

The next phase of Ofcom’s review, which will also look at how easy it is for consumers to switch provider and the rise of services such as instant messaging, is seeking responses by 8 October 2015.

The evidence it collects will shape Ofcom’s regulatory approach for the next decade.

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