Last week Ofcom finally released its long awaited Strategic Review of Digital Communications. It was this document that could have formed the basis for structural separation. It did not.
As I argued a number of times, structural separation was one option, the danger in the process would have been to believe that the other was business as usual. On paper, that is not the route that Ofcom is taking, which is a good sign.
Essentially, Ofcom says that it wants to “make a strategic shift to encourage large-scale deployment of new ultrafast networks, including fibre direct to homes and businesses, as an alternative to the copper-based technologies currently being planned by BT.”
In order to do that, Ofcom recognises that Openreach’s assets need to be available on a wholesale basis. My main fear was that since that is theoretically the case already, Ofcom would leave it be. Apparently, they want instead to see Openreach build a database of available assets: “We will require Openreach to provide a new database showing the physical location and characteristics of its ducts and poles.”
Additionally, Ofcom wants Openreach to be more independant, with its own board of directors. It may even push for Openreach to become “a wholly-owned subsidiary of BT Group, with its own purpose, board of directors and governance arrangements.”
Assuming Ofcom follows through on these changes (and remember that regulation is not regulation as long as it’s only on paper) then they are a step in the right direction. I was never convinced that the political will to go through with proper separation was ever there.
If Openreach is indeed properly ringfenced as a separate legal entity that then makes separation easier to implement down the line, not only as a regulatory remedy, but as a voluntary undertaking.
However, and this cannot be stressed enough, the measures announced will not make any difference in terms of Openreach’s ability to invest since the markets will still look at them as telecom, not infrastructure (and because the ability of BT Group to siphon Openreach profit will not be hindered.) In other words, this is no game changer when it comes to investing in rural broadband or investing in future proof urban broadband.
The game theory scenario could be that proper infrastructure competition pushes Openreach to either invest in FTTH themselves (unlikely, Google Fiber hasn’t managed to get AT&T to do that, and they’re a much bigger threat than Sky, Talk Talk, Cityfiber, Hyperoptic and Gigaclear currently are to Openreach) or to undergo voluntary separation to avoid the systematic erosion of its revenue base.
One thing is clear though: the linchpin of the whole thing is that pole and duct database. Ofcom had better start to work fast on specifying that and ensuring that whatever Openreach offers actually meets the needs of the market. If that database isn’t up and running in a year’s time, we can probably consider that the whole thing was hot air.