Ofcom seeks European Commission approval for BT/ Openreach separation

Ofcom has announced that it will notify the European Commission of proposals to partially separate BT Group from Openreach, its internet infrastructure subsidiary.  But it stops short of the full structural separation that is being urged by BT’s competitors and consumers.

National regulatory authorities including Ofcom must conduct a national and European consultation on their proposed regulatory measures.  European Commission directorate general for communications DG Connect can recommend that they amend or even withdraw the planned measures.

Ofcom believes that an overhaul of the relationship between BT Group and Openreach would bring greater regulatory certainty and that once it is independent from BT, Openreach would be better placed to invest in its broadband network.

Ofcom’s July statement had said that Openreach would become a separate company from BT with an independent board. Ofcom’s latest statement maintains its position that a full structural separation could entail materially greater costs and risks than a partial one and could affect BT’s pension scheme.

The proposals have not been well received by BT’s rivals who are continuing to press for a full structural separation.  It may be asked how the current proposals would bring about a change in BT’s behaviour in a manner that enables other entities to set up their own networks.  Inspiration might alternatively be drawn from other jurisdictions where the focus has been on incentivising other operators to invest in their own new fibre networks such as by allowing them access to the incumbent’s infrastructure on regulated terms. 

Source: https://www.ofcom.org.uk/consultations-and-statements/category-1/strengthening-openreachs-independence