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Ofcom’s strategic review of digital communications
Last month, Ofcom published its long-awaited, once-in-a-decade strategic review of the telecommunications sector, which looked at all aspects of the UK telco market, from the structure of Openreach to consumer switching.
In it, the regulator acknowledged that the current state of the market is no longer acceptable, and, crucially, that BT's monopolisation of the market is to the detriment of service providers, businesses and their customers. Ofcom concluded that ultimately Openreach should be governed at arm's length from BT Group, with greater independence in taking its own decisions on budget, investment and strategy.
The review also emphasised the need for Openreach to serve all wholesale customers equally, and consult them on its investment plans, suggesting this could be achieved by giving customers (such as Sky and TalkTalk) seats on the board. Even more encouragingly, Ofcom also expressed a specific commitment to delivering nationwide fibre to the premise (FTTP) for the first time.
This is hugely significant for our business. As I'm sure you've seen, TalkTalk campaigned long and hard in the run up to the report's publication to make sure that the regulator took the bold decisions. We truly believe that now is the time to act to make sure the UK's telecoms market is fit to meet the challenges of the next 10 to 20 years.
However, the report was a bit light on the practical details about how this greater independence could be achieved, although Ofcom's CEO, Sharon White, has since said that the regulator will make a decision "within months" – and full 'structural' separation remains an option.
While there is still plenty left to do, this is still a significant step forward and importantly, the debate around the future structure of Openreach continues. We know all too well that the current structure simply doesn't work for customers, which means it doesn't work for us as a business, either.
Until this point, it has been far too easy for BT to game the system in their favour. Just recently they were caught trying to allocate the legal costs of their takeover of EE to Openreach and Ofcom themselves have admitted that BT has made billions more in profit than the regulations allow.
Encouragingly, the report expressed a specific commitment to delivering nationwide fibre to the premise (FTTP) for the first time. Key to this will be ensuring that BT really does open up access to their poles and underground cable ducts – as we build our trial FTTP network in York, we've had direct experience that it's easier, cheaper and more efficient to build a new telegraph pole next to an existing BT one than to share it.
Overall, the report focussed more on consumer issues, which isn't surprising given that the Business Connectivity Market Review, came out only a few weeks later. When addressing the ongoing fibre charge control consultation, Ofcom didn't give much away, other than to say that they "may" impose a VULA charge control in the upcoming Wholesale Local Access review.
Finally, the regulator also reaffirmed their commitment to reducing regulation wherever possible, as long as consumers are not negatively affected, and proposed getting rid of the requirement for landlines to have a battery back-up, which would help to pave the way for all-IP landline networks.
TalkTalk’s view – Ofcom needs take bold action to secure a strong, ultrafast future for Britain
Dido Harding, CEO of TalkTalk Group, summed up the report as follows:
Ofcom has done well in identifying many of the worst problems, including recognising, finally, that BT's control of Openreach creates a fundamental conflict of interest which hurts customers.
But having accepted all this, Ofcom has produced 100 pages of consultation with little concrete action behind it. The risk is that we end up with 10 more years of debate and delays, rather than facing into the problems and delivering improvements for frustrated customers now.
Underlying the whole debate is the acknowledgement that there is benefit to the whole UK if we can solve the competition issue around broadband infrastructure. After all, if left unaddressed, the rest of the world, particularly when it comes to speeds and investment in innovation.
Obviously there is still much more to do. TalkTalk is confident that Ofcom has identified many of the challenges that the telecommunications sector need to address if the UK is to make the most of our digital potential and will continue to encourage the regulator to build on this initial report, and continue to take bold action, in order to secure a strong, ultrafast future for Britain.