Ofcom communciations review: What next for BT, Openreach, Sky and the telecoms market?
While Ofcom’s latest move is no doubt being celebrated as a win by BT’s more than vocal rivals, it’s by no means a foregone conclusion that BT is heading for a breakup.
Last time Ofcom reviewed competition, BT was forced to create Openreach in order to give access to its broadband network to rivals, something Ofcom says has provided consumers with "real choice, quality and value”. And that may be enough.
There are three main potential outcomes to this new review (which is part of a major review of the entire telecoms market and the way it functions) spurred largely by complaints that BT discriminates against rivals, most notably through poor service to non-BT customers.
1. Separating BT and Openreach completely
2. Further rules BT must follow with Openreach, such as controlling the cost of wholesale, incentives to improve the service or penalties if it fails to deliver.
3. Nothing changes
Ofcom will also factor in what part encouraging the creation of new non-BT networks will play – whether it will increase competition or lead to the duplication of networks. Currently BT owns the majority of the UK’s telecoms network, with the rest operated by Virgin Media and other smaller operators.
Ofcom will seek formal responses on the review by autumn and by the end of the year, expects to come to a conclusion on which course of action to take after weighing up the pros and cons, and of course, the arguments of the many competing companies.
Anything beyond additional rules and into breakup territory – in some form or another – is a potentially messy affair as it's unprecedented. However, the status quo of existing rules BT must comply with is by no means simple.
The consensus of analysts is that while Ofcom is on a mission to deregulate the telecoms market, a full split of BT is unlikely, and BT shares remain untroubled by today's news.
Sky believes Ofcom should "now move quickly to ask the Competition and Markets Authority to undertake a full competition review". It and other competitors of BT won the battle in getting Ofcom to review Openreach, but the war is by no means won in their bid to split BT.
