British telecoms, FCS and INCA providers propose improvements to BT's Openreach in 10-point plan to Ofcom
Written by: Laurence Doe | Published:

​Telecoms providers, Sky, TalkTalk, Vodafone UK and two industry associations, the Federation of Communication Services (FCS) and the Independent Networks Cooperative Association (INCA), are challenging Ofcom to deliver on its promises to reform BT’s Openreach subsidiary and future-proof Britain’s voice and broadband capabilities.

In an open letter this morning (published below), the signatories present Ofcom CEO Sharon White with a 10-point road-map to ensure Openreach is fit to equip the nation for future challenges.

“We believe it’s vital the people who decide what ‘good’ looks like should be Openreach’s customers,” says Chris Pateman, CEO of the Federation of Communication Services, whose members specialise in serving Britain’s 5 million business customers. “Frankly, FCS was disappointed Ofcom’s review of digital communications stopped short of recommending the complete structural separation of Openreach from the BT Group. Ofcom believe improvements can be delivered without the hassle and delays of a full separation: our 10 point plan represents the industry’s proposals on how this can be accomplished.

"Importantly, as our plan makes clear, we believe this can be accomplished swiftly and cost-effectively, using well-proven corporate governance principles. And it can be benchmarked against experience from other regulated utilities, both in the UK and overseas.

"We are throwing down a challenge, underpinned by sound research and experience. A challenge to Ofcom, Openreach and the industry to work together to shape the future for the good of all market players and all customers."

An Ofcom spokesperson commented: "We will publish proposals on the future of Openreach in the summer.”

A BT spokesperson said: "We are in talks with Ofcom, discussing constructive ideas to further enhance the independence of Openreach from the rest of BT Group.

"Key suggestions made by other companies today seem incompatible with the legal responsibility that the Board of any listed company has when it comes to stewarding shareholders' money responsibly."

INCA, along with many other stakeholders, had argued that Ofcom’s review offered the chance to overhaul the framework. The INCA's recommendation to Ofcom was that the first step in updating the framework should be a referral to the Competitions and Markets Authority (CMA), which did not take place. However, INCA members welcomed steps to open up the Openreach infrastructure to competitive providers.

In a statement made in February, Malcolm Corbett, INCA's chief executive said: "We are disappointed that Ofcom hasn't gone further to challenge the control BT exercises over the communications market, but pleased that Sharon White and her team have recognised the need for significant changes.

"INCA members build new fibre and wireless networks, often in the most challenging areas of the UK. For too long they have struggled to make sense of the rules and restrictions surrounding access to BT's ducts and poles. A few stout-hearted companies are having a go - notably Warwicknet, Callflow Solutions and Hyperoptic - so steps to make it it easier for competitors to use the existing infrastructure are welcome. It means faster deployment of the high speed, affordable broadband services that consumers and businesses need."

The letter accompanying the 10-point plan reads as follows:

Dear Sharon,

10 Point Plan for a Better Openreach

We are an industry coalition comprising Sky, TalkTalk, Vodafone, the Independent Networks Cooperative Association (INCA) and the Federation of Communication Services (FCS). Together we represent the interests of the majority of consumers and businesses that rely on Openreach, serving millions of broadband customers and spending billions each year on the national network. We represent the builders and operators of the UK’s next generation digital networks, as well as companies which deliver communications solutions to hundreds and thousands of organisations both big and small.

In February, Ofcom’s Digital Communications Review concluded that reforming Openreach is critical to improving Britain’s telecoms market. Although it stated that separation of Openreach from BT Group is “the cleanest and most clear-cut long-term solution”, Ofcom indicated that it would first explore other options that might deliver the necessary changes with less disruption. Ofcom is therefore considering how to create a more independent and customer-centric Openreach within BT Group. We are pleased that Ofcom is committed to an open, transparent and inclusive approach to this reform process, rather than a closed door negotiation with BT. We are therefore writing to set out our vision of how Ofcom can deliver its objectives.

We agree with Ofcom’s conclusion that the status quo cannot be allowed to continue over the next ten years given the critical importance of the UK’s digital communications infrastructure. The national network has to be able to deliver the world class connectivity that Britain needs, enabling a dynamic market where all industry players can invest and compete on a level playing field. We also agree with the UK Government when it stated that “the current relationship between BT and Openreach will not deliver the country’s needs for more competition, better innovation and better service”, and note that it urged Ofcom to take “whatever action is needed” to achieve this.

In light of this, we are publishing this coalition’s ’10 Point Plan for a Better Openreach’, a programme which, if implemented in full, should deliver on Ofcom’s vision. This plan contains a series of proposals aimed at reforming Openreach. It reflects best practice as outlined in the UK Corporate Governance Code and the proposals have also been drawn from a number of proven approaches in other UK sectors including the energy, civil aviation and water markets,as well as elsewhere around the world. Our proposals are grouped into three broad areas:

Reforming Openreach’s governance so it can act independently

Giving Openreach clear purpose and accountability by:

1. Establishing Openreach as a legally separate company

2. Creating an independent Openreach Board

3. Creating an independent body to oversee the transition and act as an adjudicator

Giving Openreach the tools it needs to succeed

Creating a confident and ambitious Openreach that has the autonomy to plan for the future by:

4. Giving Openreach full control and ownership of its assets

5. Ensuring Openreach has its own standalone corporate identity and brand

6. Allowing Openreach to be financially independent and make its own investment decisions

Creating an Openreach that delivers for all

Making sure that Openreach serves the whole market fairly to improve choice, value and quality for its customers by:

7. Providing all Openreach services on the same basis, no matter the customer

8. Ensuring that Openreach consults with all of its customers about its future strategy and proposed investments

9. Introducing competition to Openreach by making BT Consumer’s procurement truly contestable

10. Ensuring that Openreach does not inhibit investment by independent network operators

If implemented in full, these reforms should deliver the step-change in effectiveness that customers need and remove barriers to a competitive market. The measures we have proposed are not controversial or drastic, but reflect arrangements which are commonplace for large listed companies. Our proposals are straightforward, simple, and can be achieved quickly and cost effectively.

We are committed to helping Ofcom achieve its goal of a more independent and responsive

Openreach to the benefit of consumers. Reform is crucial to delivering the improved digital connectivity Britain needs. We believe that our plan is a vital step in achieving that vision.

Yours sincerely,

Jeremy Darroch, Group CEO, Sky

Dido Harding, CEO, TalkTalk

Jeroen Hoencamp, CEO, Vodafone UK

Malcolm Corbett, CEO, Independent Networks Cooperative Association

Chris Pateman, CEO, Federation of Communication Services

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