BT: ‘Voluntary Agreement’, Not Legal Action Is Best Way To Fix Openreach

BT says a voluntary agreement between itself, Ofcom and other broadband providers is the best way to address concerns the regulator has about Openreach and wants to avoid any lengthy legal dispute.

Ofcom’s once-in-a-decade review of the UK communications market raised a number of issues regarding competition and performance that it feels need to be addressed by BT and through regulation, but stopped short of acquiescing to some rivals’ demands that Openreach be spun off entirely.

BT has submitted a number of proposals to Ofcom in a bid to reach a deal, but it is understood that the company must offer more if it is to avoid a forced breakup, which the regulator has said is still an option.

Read More: What do broadband providers think of Ofcom review?

Best way forward

“We’re very keen to understand and address Ofcom’s concerns,” Mark Shurmer, BT group director of regulatory affairs said in a call following the publication of Ofcom’s initial findings. “At first glance, a great deal of what they are proposing is already in place and we’re very much open to discussion to see how the rules can be built on and improve upon.

“We’re pleased [Ofcom] are not making a reference to [Competitions and Markets Authority] and are instead looking at how current model can be strengthened. You can see Ofcom make reference to some proposals we’ve made to them.

“Although they say [the proposals] might not go far enough, they’ve said they’re open to a voluntary agreement. That can be done in the next few weeks and months. If we go down the formal route, it can be a tortuous process, but I don’t think we’ll get there.”

BT has previously suggested any move to forcibly move Openreach from its grasp would be met with years of litigation and some have suggested this has influenced Ofcom’s decision not to call for a breakup but instead work towards ‘structural separation in all but name’.

“We certainly would be challenging of a proposal for structural separation in ‘anything but name’,” continued Shurmer. “[Ofcom] are quite keen to stress the need for balance between the benefit of having Openreach remain part of BT and fair competition. That’s been the thrust of the model that’s worked so well for the past ten years. As a result of that, we have the most competitive market of our European peers.

“We absolutely agree, ten years on, it’s time to see how it can be refreshed and updated. I think it’s in everyone’s interests to [do a voluntary agreement] very quickly.”

Working together

One of the recommendations put forward by Ofcom is for BT to open up Openreach’s ducts and telegraph poles to other providers, allowing them to lay fibre cable alongside copper. BT says it has offered this since 2009, but the cost of deploying a nationwide network has proved prohibitive for anyone to take up the offer.

“We agree with Ofcom that choice is important,” said Shurmer. “There has been limited interest to date, but we’re now very happy to work with Ofcom to improve that product if there’s certainty of demand. Our own experience is that deploying networks is an expensive business and involves a long payback, but if people do want to [deploy alternative infrastructure] they’re at liberty to do that.”

When asked by TechWeekEurope why Ofcom was placing such emphasis on a measure that appears to have been available for the past seven years, Shurmer suggested the regulator wanted to see if more could be done to make the product appealing to BT’s competitors.

“What’s Ofcom is saying is ‘let’s have a look at that product’,” he said, explaining the price of the product is not regulated, but Ofcom believes the price is “appropriate” and that the main barrier so far has been cost of deployment.

To make this easier, Ofcom says BT should make detailed information about the location of ducts and poles available to rivals so they can make plans. Shurmer said that because demand since 2009 has been so low, a lot of the information available has been recorded manually. If interest was to rise, he said, automation could make it easier to create a database and for competitors to take advantage of the ability to use poles and ducts.

“It’s right to have it as an option,” he said. “We’re prepared to sit down with Ofcom and industry. [But] that doesn’t change the economics of it.”

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