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Startups in the\u00a0UK will be hoping for better performance\u00a0from the local broadband\u00a0market after telecoms regulator Ofcom agreed a deal with the country\u2019s largest broadband\u00a0provider, BT, to legally separate Openreach: aka the division of BT that\u00a0builds and maintains\u00a0the broadband infrastructure.<\/p>\n
It\u2019s not a\u00a0full structural separation \u2014 as some have called for \u2014 but\u00a0is a\u00a0step further than the functional separation imposed by the regulator just over\u00a010 years ago. Under the new deal Openreach will\u00a0still be owned by BT but\u00a0will be more independent, gaining its own management staff, an independent board and directly employing its\u00a0circa 32,000 staff.<\/p>\n
Ofcom believes this\u00a0legal separation\u00a0will allow Openreach to develop \u201cits own distinct organisational culture\u201d as a BT-owned company vs just being a division of the telco giant. And although BT\u00a0will still be setting Openreach\u2019s overall budget, the decisions on how the\u00a0money is allocated will be taken independently of the telco.<\/p>\n
The main hoped for outcome is increased investment in broadband infrastructure\u00a0and better access for rivals to BT\u2019s networks. Competitors (and consumers) have long complained the telco has dragged its feet about investing in the network in order to protect its own bottom line \u2014 leaving UK broadband consumers to suffer slower speeds and higher prices than they might otherwise.<\/p>\n
BT\u00a0does not own and operate\u00a0the only broadband network in the UK, but given its long history and former status as a monopoly supplier of the national\u00a0telephone service it does have the largest network. Meanwhile rivals that have built their own broadband networks \u2014 such as cable\u00a0provider Virgin Media \u2014 have tended to concentrate on more densely populated regions, leaving large areas of the country where the only choice for broadband is to use BT\u2019s pipes.<\/p>\n
There\u2019s added significance to the separation\u00a0because BT\u00a0does not just control\u00a0fixed line broadband either; just over a year ago<\/a>\u00a0its $19BN acquisition of a major UK mobile operator, EE, was cleared by the UK\u2019s Competition and Markets Authority \u2014 bringing the telco back into the mobile market as a dominant player.<\/p>\n In a statement commenting on today\u2019s\u00a0deal, Ofcom\u2019s CEO Sharon White said: \u201cThis is a significant day for phone and broadband users. The new Openreach will be built to serve all its customers equally, working truly independently and taking investment decisions on behalf of the whole industry \u2014 not just BT.\u201d<\/p>\n How significant the arrangement will prove remains to be seen, of course. And despite the regulator\u2019s\u00a0upbeat sentiments,\u00a0the very large expensive of laying full fiber to the home\/premise \u2014 aka the fixed line broadband installation that supports the highest broadband speeds, vs alternatives such as fiber to the cabinet (which BT has preferred) \u2014\u00a0means the telco\u00a0will, in practice, still exert considerable control on Openreach\u2019s ability to ramp up broadband investment, given its continued hold on the purse strings.<\/p>\n Without the ability to significantly increase investment, Openreach will be unable to significantly expand access to\u00a0the fastest fixed line broadband speeds\u00a0\u2014 so it\u2019s not clear that a legally independent Openreach will be as radically transformative for the national broadband landscape as some might wish. (As of last August less than 780,000 UK homes were estimated<\/a> to have\u00a0access to BT\u2019s full fiber to the premise broadband product, which supports speeds of around 300Mbps and is slated to rise to 1Gbps.)<\/p>\n The deal with Ofcom does mean\u00a0Openreach<\/span> will be obliged to consult formally with customers such as Sky, TalkTalk and Vodafone on large-scale investments. So rivals should be able to exert more influence on the direction of infrastructure travel.<\/p>\n Ofcom also notes there will be \u201ca \u2018confidential\u2019 phase during which customers can discuss ideas without this being disclosed to BT Group, as well as further protections for confidential customer information\u201d \u2014 but again, it remains to be seen how that works in practice.<\/p>\n The regulator adds that it will also be monitoring the new model \u201cto ensure it is effective\u201d. So there\u2019s always the chance that BT will face further action in future \u2014 albeit regulatory intervention timescales to date in this space suggest\u00a0BT will\u00a0have a fair amount of breathing space before\u00a0having to worry about further intervention.<\/p>\n Ofcom had previously threatened to resort to EU regulators if BT would not agree changes to how Openreach operates \u2014 but securing a voluntary deal with\u00a0BT\u00a0is by far the faster route to achieving at least some change. (Not least given the added complication of Brexit<\/a>.)<\/p>\n The UK government also finally put out its long awaited digital strategy last month<\/a>\u00a0\u2014 which includes a commitment for a\u00a0universal service obligation for broadband<\/a>\u00a0(with a floor of 10Mbps connection). BT has previously said it is ready to fund\u00a0the USO itself, although it wanted an agreement to\u00a0be reached with Ofcom before starting work \u2014 so today\u2019s deal paves the way for movement on that front.<\/p>\n A\u00a0basic floor\u00a0of 10Mbps by 2020 isn\u2019t going to excite the cutting edge of UK tech. But closing some broadband blackspots\u00a0should at least raise the overall addressable market for most digital services.<\/p>\n","protected":false},"excerpt":{"rendered":" Startups in the UK will be hoping for better performance from the local broadband market after telecoms regulator Ofcom agreed a deal with the country’s largest broadband provider, BT, to legally separate Openreach: aka the division of BT that builds and maintains the broadband infrastructure. Read More<\/a><\/p>\n\n<\/img><\/a>
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