OFCOM announcement regarding BT Openreach

 In Telecoms

You may have noticed in the media this week that the UK communications industry regulator – OFCOM – has announced that they have ordered BT to legally split from Openreach. So what does that mean for the industry and more importantly, what does that mean for your business?

Firstly, let’s take a look at BT, and then let’s have a look at OFCOM. This is written from a personal perspective but I have been in the telecoms industry for 22 years so I have a good understanding of how things work and how they don’t.

The Relationship Between BT and OFCOM

In the beginning there was The General Post Office (GPO), and they ran the phone lines as well as their other businesses – remember Buzby? British Telecom was launched in 1981, taking the telecoms business away from The Post Office. The new “BT” was privatised in 1984 (remember Maureen Lipman as ‘Beattie’?), and opened the door to competition from hundreds of new and existing organisations, including Cable & Wireless and the emerging cable TV operators.

OFCOM was launched in 2003, replacing the previous regulator OFTEL. Premium Rate (e.g. 09 numbers) are governed by “Phone Pay Plus.” In my humble opinion, the regulator has done very little to help the industry.

Where OFCOM Has Failed

It starts with a lack of knowledge of the industry which it governs. As a Service Provider we have occasional contact with OFCOM and rarely find they know what we are discussing, let alone be in a position to actually help. To me, they have let “BT” dictate terms to all other providers, and have let the infrastructure of the UK network fall way behind the standards of our European neighbours.

Part of the problem is that BT is still a massive organisation comprising retail (e.g. BT Local Business), wholesale (BT Wholesale, who provide phone call traffic and internet services to service providers), BT Openreach (who provide the network infrastructure for all Service Providers to use), BT Global Services, and countless others such as BT Mobile and now BT Sport.

In theory, all Service Providers in the UK – such as TalkTalkSkyLG Networks and BT Local Business) all buy services from BT Openreach and are afforded the same service delivery and response times. However, many operators complain that Openreach gives priority to its own partners such as BT Retail (sorry, I know it’s confusing).

As part of the deregulation of the industry, the government/regulator sold franchises to allow operators to build a separate network to BT – i.e. the cable network, now largely dominated by Virgin. In the US, when the telecoms industry was re-regulated, the Bell Corporation was broken up into many ‘Baby Bells’, including ‘Southwestern Bell’, ‘NYNEX’ and ‘Bell Atlantic’, many of which bought franchises to provide cable services (including TV & phone lines) in the UK in the 1980s.

These names developed into corporations such as AT&TVerizonTelewest (which was bought out in 2005)  and others during the 1990s and some still operate in the UK. Many believe that BT should have been broken up into its component parts long ago.

The Future of BT

So what is the answer, and what is the outlook for businesses? Well, in my opinion the retail, wholesale and network services should be totally separate companies. OFCOM are demanding that the network services (BT Openreach) becomes “a distinct company within BT Group” (or a wholly owned subsidiary in my mind), which will change very little.

It is likely to deliver little improvement in service delivery or investment in the network (which could have been generated by proper competition) during the time that Openreach remains part of BT Group. Fingers crossed, OFCOM may grow some balls and actually force change, so let’s see what happens over the next few months (and probably years…) Watch this space.

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