In its initial response to Ofcom’s conclusions following its Strategic Review of Digital Communications, BT says it welcomes the regulator’s comments regarding the separation of its Openreach network subsidiary and confirmed plans to build an even faster network and address slow speeds in the final five per cent of the country.

BT Chief Executive Gavin Patterson said: “The UK is ahead of its European peers when it comes to superfast broadband and we want it to maintain that position. That is why BT is keen to make significant additional investments over the next five years and beyond.

“We want to build an even faster network and we also plan to address slow speeds in the final five per cent of the country. It is also important that we give small businesses further options aside from dedicated lines, which suit many but not all. Customer expectations have increased dramatically in recent years and we are keen to work with Ofcom and industry to meet those expectations. We all want to improve service. Openreach is already subject to regulated service standards and we are happy to work with Ofcom to improve them.

“Our plans would help ensure the UK remains the leading digital nation in the G20 and we are keen to get on with the job.  They involve large scale investment however and that requires a high degree of regulatory clarity and certainty, something that is missing at present.

“Ofcom have today explained why breaking up BT would not lead to better service or more investment and that structural separation would be a last resort. We welcome those comments. The focus now needs to be on a strengthened but proportionate form of the current model and we have put forward a positive proposal that we believe can form the basis for further discussions with both Ofcom and the wider industry.

“Our proposal includes a new governance structure for Openreach as well a clear commitment on investment. Openreach is already one of the most heavily regulated businesses in the world but we have volunteered to accept tighter regulation to bring matters to a clear and speedy conclusion.

“We are happy to let other companies use our ducts and poles if they are genuinely keen to invest very large sums as we have done. Our ducts and poles have been open to competitors since 2009 but there has been little very interest to date. We will see if that now changes.

“We are keen to understand and address Ofcom’s concerns so we will review their paper in detail. A great deal of what they are proposing is already in place and we are open to discussions about how the current rules can be amended and updated. A voluntary, binding settlement is in everyone’s interests and we will work hard to ensure one is reached.”

Sky, which had been a vocal in its support for separation of Openreach, said it welcomed Ofcom’s recognition that the current Openreach model was not working and that fundamental change was required. In its own Statement, it said that BT must now be held to account for improving service and enabling delivery of fibre to Britain’s homes and businesses.

“Ofcom’s actions today are not the end of the debate but a staging post towards delivering the network and service that Britain needs. We believe the simplest and most effective way to fix the current broken market structure is for Openreach to be completely independent. We are pleased to see that separation is still on the table,” it said.

“We will work with Ofcom to deliver change at Openreach and we look forward to playing a positive role in helping make Britain a digital world leader.”

Matthew Howett, Practice Leader, Regulation, at global technology research and advisory firm Ovum, notes that for now, BT has avoided the need to spin off Openreach from the rest of BT, although it has ensured that the threat of separation remains in place until a strengthened model of functional separation can be agreed. “The regulator plans to develop a set of proposals with the European Commission, a so-far unused and untested process. A quicker route to the same outcome would be a voluntary agreement between BT and its rivals that Ofcom would make binding through a variation to the so-called undertakings that BT signed up to back in 2005. Ofcom seems open to this approach, having confirmed that voluntary proposals could also address the concerns identified. Ultimately a long and protracted regulatory battle is not in the interests of BT, its competitors, or the consumers and businesses reliant on the broadband infrastructure,” he suggests.

“Ofcom is also suggesting that there could be greater choice for businesses and consumers in the form of competing network infrastructure. This would be achieved by alternative operators deploying their own fibre using BT’s network of ducts and poles. Since 2010 BT has been obligated to share this infrastructure, but so far there has been very little interest in it actually doing so. Ofcom maintains that this is because of ‘operational process issues’ and is calling on BT to engage with its rivals to see what needs to be done to make greater use of these ducts a reality. In some ways, this puts the ball firmly in the court of those calling for more fibre investment, who have so far found the process unworkable,” he concludes.

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