Perhaps Ofcom should review the UK communications market every year – because its current one certainly seems to be causing waves at BT.
The regulator put the future of BT’s Openreach network infrastructure subsidiary on the table in July when it published a discussion document offering a break-up of the telecoms giant as one of the future options under consideration.
Despite BT’s multibillion-pound investment in what it refers to as fibre broadband – in reality, fibre to the street cabinet (FTTC), not to your front door like the world’s most advanced broadband countries – the firm faces regular and frequent criticism over its roll-out of superfast connectivity.
The accusations against BT have been well documented – ignoring rural areas, monopolising the government funding for roll-out, steamrollering smaller local broadband providers, to name a few – and have been equally robustly defended.
BT – and the government – point to the UK as a broadband leader in Europe as justification for the current set-up. An independent report this week supported their claims, stating that: “When it comes to superfast broadband coverage, the UK is around three years ahead of the western European average”.
But Europe is not the benchmark by which we should be measured – our neighbours have comparatively moribund broadband, restricted as they are by the dominance of their former telecom monopolies. We need the UK to be a world leader, with a digital infrastructure the envy of our international competitors. That means starting to invest in fibre everywhere now.
The focus of debate is increasingly around Openreach, as rivals such as Sky, Vodafone and TalkTalk call for it to be split off to encourage more investment in replacing the country’s ageing copper infrastructure.
BT, while stoutly insisting there is no case to be made for separation, has responded with a raft of commitments to further improving the UK’s broadband infrastructure – extending FTTC beyond the current 95% target, increasing minimum speeds to 5Mbps and beyond, and a faster roll-out of “ultrafast” (but still copper) broadband offering speeds up to 500Mbps.
It’s amazing what a whiff of regulatory and competitive pressure can do. BT will say it would have done all that anyway, but there’s little doubt the Ofcom review has focused minds, if not accelerated plans.
Nonetheless, the fact that BT needs to be so assertive is a sign that competition in the broadband market doesn’t work. In a fully functioning market, rivals would be falling over each other to compete by improving their services, instead of relying on BT to improve the infrastructure for them to resell.
The Ofcom review has thereby demonstrated not only its own importance, but the reason why separating Openreach is the best option. An independent Openreach, relying not on a dominant parent but on a diverse market for its income, means less regulation in the sector. Less regulation means more competition; more competition means the UK’s digital infrastructure can keep pace with the world leaders. That is the benchmark Ofcom should aspire to.