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Sky and TalkTalk make final case to separate BT and Openreach

The Ofcom consultation on the future relationship between BT and Openreach has ended, and a number of broadband stakeholders have been putting their views across

As Ofcom’s public consultation on the future of the relationship between BT and Openreach draws to a close, BT’s rival internet service providers (ISPs) have been making their final arguments in favour of full functional separation of BT and Openreach.

Sky and TalkTalk – both participants in the ongoing Fix Britain’s Internet campaign, which tried to create a groundswell of public support for the separation of BT and Openreach – revealed details of their responses to the regulator’s request for views.

Sky’s group COO and CFO, Andrew Griffith, said a critical point in the debate on the future of the UK’s broadband infrastructure had now been reached.

“It’s time to move from words to action. It is clear that a structurally separate Openreach is the best way forward to deliver the broadband that the UK so desperately needs for the future,” said Griffith.

“There’s no reason this can’t happen. A fully independent Openreach would be a sizeable FTSE 100 company, able to attract capital from investors, partner meaningfully with its wholesale customers, and raise its quality of service for consumers. Ofcom has a real opportunity to take the necessary steps to ensure that Britain is fit for the future,” he said.

Sky’s lengthy submission argued that more than a decade on from the creation of Openreach, there were pervasive and persistent concerns arising from BT’s vertical integration of its arms-length infrastructure business, which it perceived as giving BT an unfair advantage.

Full structural separation, it argued, was the most clear-cut and enduring option for securing effective Openreach independence, removing any ability and incentive for BT to influence it. However, it recognised that Ofcom’s proposal of legal separation could deliver “meaningful change” if managed correctly.

According to Sky, this would require the full transfer of assets and employees to Openreach, giving them full autonomy from BT.

It would also require a process for genuinely independent governance, with board members appointed in a way that was free of BT’s influence, and ultimately, the removal of all BT directors from the Openreach board; and genuine financial independence, giving Openreach the power to raise its own capital, and making sure it was audited separately.

Read more about the future of Openreach

TalkTalk, however, went further. In its statement, it said it was “firmer than ever in its conviction that only full structural separation of Openreach will give consumers and businesses the investment, value and quality of service they need and deserve”.

It accused Ofcom of merely “rearranging the deckchairs” in its proposals for legal separation. Its statement continued: “TalkTalk does not think that ‘trying out’ legal separation for a few years is likely to provide the ‘smoking gun’ evidence that Ofcom seems to think it needs before imposes [sic] structural separation.”

It said legal separation could only work if Ofcom moved to robustly regulated BT’s wholesale fibre-to-the-cabinet (FTTC) products and increased its willingness to come down on BT if it breached both existing regulation or the still hypothetical legal separation model.

“Based on past experience, TalkTalk is extremely sceptical about Ofcom’s capability to transform itself and genuinely hold BT to account,” said the operator.

Thinkbroadband.com analyst Andrew Ferguson said: “One hopes that those keen to see an Openreach Plc have shown Ofcom that they have the funds ready to invest and ensure that the new Plc – if formed – is very rapidly able to shift its focus and recruit the number of staff needed if a rapid widespread fibre-to-the-premise (FTTP) roll-out is to be undertaken.”

According to Thinkbroadband, Sky and TalkTalk’s campaign – which was also joined by Three and Vodafone – appeared to have had a massive last-minute rush to register before the consultation deadline.

However, Ferguson noted that it was impossible to tell how many of the respondents – thought to number 100,000 by the end of the process – were just upset about poor customer service experiences they had with BT, and how many had considered the issues and supported the notion of an independent Openreach.

Read more on Telecoms networks and broadband communications

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At a fringe meeting during the Conservative Party Conference Sky revealed that spends 800 million a year to Openreach for backhaul. It was said that if Openreach were structurally separate it could turn than into a ten year contract in return for the improvements in speed and quality of service needed. 
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