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Sky: ‘Separate Openreach from BT’

Mai Fyfield, Sky’s Chief Strategy Officer, has called on regulator Ofcom to refer dominant telco BT’s ownership of its Openreach national network to the Competition and Markets Authority, suggesting that Openreach’s ownership structure means that companies that compete with BT, such as Sky and TalkTalk, cannot work with Openreach on innovations such as fibre to the home.

In a Blog Post, Fyfield advises that Sky will be making its final submission to Ofcom as part of its Strategic Review of the UK’s digital communications market.

“The outcome of this review is incredibly important for everyone in the UK. It is a once in a decade opportunity to make sure that the UK benefits from a network that can meet the ever growing demands for better and faster broadband. If we want to achieve the growth and productivity the UK economy needs then we need a communications infrastructure fit for not just the next 10 years, but for 20 or 30 years ahead,” she says.

“We believe that for the UK to keep up with the rest of the world the focus has to be on investing to make Gigabit broadband widely available to homes and businesses. It’s what our international competitors are doing. The New Zealand government has accelerated roll-out of fibre to 80 per cent of the population by 2022. In Japan and Korea, more than half the population already receives connection speeds above 100Mbps.”

According to Fyfield, the reality in the UK today is very far from that goal. “The national network run by Openreach relies heavily on copper wires and delivers unacceptable levels of faults and service problems for consumers and businesses. So what’s stopping us moving forward? The root of the problem is that BT, just one of the major broadband providers, has sole control of Openreach. This means that decisions about investment in this critical national infrastructure reflect the interests of BT rather than the whole industry and the businesses and consumers that use its service. To make matters worse, from BT’s point of view, it makes perfect sense to sweat the existing copper network for as long as possible.”

“Openreach’s ownership structure means that companies that compete with BT, like Sky and TalkTalk, cannot work with Openreach on innovations like fibre to the home. And, with no prospect of BT’s retail arm using an alternative high speed fibre network to deliver services to customers, there is limited scope for new infrastructure entrants as they would only be able to compete for Sky and TalkTalk’s business.”

According to Fyfield, the separation of Openreach from the rest of BT will allow it to form part of a more competitive market solution as an independent company. For example, if BT’s retail arm could purchase network services from alternative suppliers, an independent Openreach would be motivated to respond with investment and innovation of its own. As a standalone FTSE 100 company, Openreach would be highly attractive to long-term investors and able to raise fresh capital to invest on the back of future growth from the whole industry,” she suggests.

“It’s not just the other broadband providers who think this is the way forward. According to a recent YouGov survey, more than three times as many broadband users think Openreach should be independent, compared to those who think it should be owned by a broadband provider. The current market structure has enabled ambitions to remain modest, with Openreach’s total capital expenditure remaining broadly flat over the last few years. Even now, when the opportunity is so clear, the plans BT have already shared for Openreach such as ‘G.Fast’ still rely on the old copper network when we know that we can only achieve the speeds the UK needs with fibre.”

She says the review is an opportunity for Ofcom to refer the matter to the Competition and Markets Authority, which has examined market structure in sectors such as energy and transport and has wide-ranging powers including separation. “By being bold enough to look beyond the status quo, we can finally see the national network get the investment and ambition to deliver the broadband that the country needs to prosper in the future,” she concludes.

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