Ofcom has announced the second phase of its strategic review of digital communications. The review was launched in March to examine competition, investment, innovation and the availability of all digital communications services. Ofcom expects to receive some guidance on future regulatory approaches for the next 10 years, including to address challenges such as the future of the incumbent BT.
Ofcom’s last review in 2005 led to the creation of Openreach, a separate business unit for BT’s network. Tim Cowen, partner at Preiskel & Co, was acting as BT Chief Counsel Competition law and Public Policy during the negotiations of the Openreach undertakings. The model was designed to ensure BT would face the same commercial conditions as its competitors relying on Openreach for access to their subscribers. Although Ofcom recognises that this structure reduces the risk of discrimination, it does not completely remove it. In addition to that, Ofcom has concerns regarding Openreach’s performance and incentive to invest in its network.
In order to address the future of Openreach, Ofcom has proposed four solutions: (i) maintaining the current model; (ii) strengthening the current model, which may involve controlling BT’s wholesale charges and implementing incentives to improve quality of service, or imposing tougher penalties if BT fails; (iii) fully separating Openreach from BT, which would lead to removal of BT’s incentive to discriminate against competitors and would not address the quality of Openreach’s services; or (iv) deregulating the market and promoting competition between networks that do not have to rely on BT’s wholesale services.
The review will also address other areas of the communications market, including how consumers and business can be empowered to make competition more effective, and how to ensure all households throughout the country have connectivity with enough quality. Responses on the second phase may be sent by 8 October.