What future for BT and the UK's broadband?

Superfast broadband Image copyright BT

Communications regulator Ofcom has announced how it intends to ensure a more independent Openreach, the BT-owned company that is responsible for much of the UK's broadband infrastructure.

Its proposals form part of a wider look at the UK digital economy, at a time when consumers and governments alike recognise that broadband is nearly as vital as the water and electricity supplies.

Complaints about net services are at an all-time high.

And for many, broadband is still slow or non-existent.

What was the review about?

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Every 10 years, Ofcom publishes its views on the UK's digital economy. This review has focused on a number of questions, including:

  • Do consumers and businesses have enough choice of networks?
  • Does Openreach, the BT-owned company that runs the UK's phone cable network, need reform?
  • How can the UK industry improve consumers' experience when it comes to broadband installation and service?

Although Ofcom was keen to look at these questions in the round, the focus has been on whether it would call for BT to be split up. The firm is one of the UK's largest service providers and also owns Openreach, the business responsible for telecoms and broadband infrastructure.

What has it concluded?

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The regulator has fallen short of calling for a full structural separation of BT and Openreach but the model it has suggested is, according to telecoms analyst Matthew Howett, "significantly different to the one that is in place today".

Most agree that the proposals are about as radical as they could have been without taking the ultimate step of structurally separating Openreach from BT.

"In many ways, a voluntary agreement between Ofcom and Openreach, which is backed by the rest of the industry, would achieve more than years in court and a forced enhanced model of separation could," Mr Howett said.

"Many of the things proposed by Ofcom, and that are being offered by BT, could be enacted within months. Attention and money could then turn to getting on with delivering what this review is ultimately all about - making sure Britain has the broadband infrastructure fit for the next decade."

Many of the changes have been volunteered by BT with a focus on "an obligation for Openreach to serve all its customers equally". Customers, in this case, means the internet service providers that use its infrastructure.

Remind me, what exactly does Openreach do?

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Openreach is the infrastructure division of BT, which manages the network that runs between BT's exchanges and people's homes.

This is known as "the last mile" and involves maintaining the UK's copper and fibre network.

The division is currently involved in a £2.5bn upgrade of the green street cabinets that are a familiar site on the UK's pavements.

Image copyright PA

It is using a combination of technologies, deploying:

  • so-called fibre to the cabinet, which provides fibre optic between the cabinets and the exchanges but uses cheaper copper to connect to homes
  • fibre to the home, which uses fibre for the entire connection between telephone exchanges and homes

The majority of Openreach's connections are fibre to the cabinet, a decision which has been criticised by some.

So how will things be different now?

Openreach will look very different on the inside with all its staff becoming employees of the new company which will also have its own board, not affiliated with the BT Group and with appointments requiring Ofcom approval.

BT has also promised better customer service, with a pledge to bring all call centre staff back into the UK. Many are currently based in India.

But for consumers, rather like the Brexit vote, there will be no immediate changes, said Andrew Ferguson, editor of broadband news site ThinkBroadband.

"These changes are not going to happen overnight and there is no magic pot of extra investment money.

"For those waiting on better broadband connectivity, today's news brings the promise of a very different UK market in three to five years' time, but for those crying out now for a better broadband connection, the negotiations and the time needed for the new Openreach to find its feet mean no big change to the existing rollouts."

Why is change needed?

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According to the UK's Ombudsman Services, communications complaints are increasing year on year, with the sector responsible for the second highest number of consumer grumbles - second only to retail.

Last year it received more than 24,500 complaints and had 83,000 initial contacts from consumers experiencing problems with their service provider.

One of the biggest bugbears is the fact that, while Openreach is often responsible for fixing faults, it has little or no contact with consumers who must instead deal with their service providers.

The review promises automatic compensation for faults.

Andrew Ferguson, editor of ThinkBroadband, thinks that could "increase the incentive for Openreach to avoid having faults occur in the first place".

Ofcom has also acknowledged that the consumer can find it hard to work out which are the best deals and what speeds they will get. Some decide it is too time-consuming to switch operators.

How have BT rivals reacted?

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TalkTalk's head Dido Harding said that "the creation of a genuinely separate Openreach is a step in the right direction" but warned that a similar thing was proposed 10 years ago and failed to deliver.

"BT has proven itself expert at gaming the system and there is nothing to suggest they will not continue to do so in the new system. Structural separation is cleaner, neater and with less red tape and removes BT's ability to exploit loopholes in the regulation," she said.

She also warned that consumers may not support the proposals. "Now is the time for the country to make their voices heard and we are going to help them do that over the course of the new few months."

Sky chief executive Jeremy Darroch also said that the move fell short of the major shake-up it had hoped for.

"In particular, leaving Openreach's budget in the hands of BT Group raises significant questions as to whether this will really lead to the fibre investment Britain requires."

And Mark Collins, director of strategy at CityFibre said that it was "hypocritical of Ofcom to focus on a restructured Openreach as a panacea".

So what happens next?

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More consultation but with most agreeing with CCS Insight analyst Kester Mann that "the sooner final plans can be drawn and got underway, the better".

He points out that the matter is still not entirely concluded.

"Although BT will breathe a sigh of relief that Openreach will remain a part of the group, Ofcom's strongly worded statement should leave it under no illusions that it needs to up its game. Indeed, the threat to hive off Openreach still remains if it is unable to act more independently from the BT group."

And for consumers, the details of the changes are irrelevant, said Richard Neudegg, head of regulation at uSwitch: "Quite frankly, consumers - too many of whom are familiar with delays incurred by Openreach even when BT isn't their retail provider, don't care how it's done. They just want and deserve a better service."

Openreach is investing in improving speed with its ultrafast technology known as, which can offer speeds of up to 500Mbps (megabits per second).

It is also in the midst of a superfast broadband rollout, aimed at reaching 95% of UK homes by next year - a rollout subsidised with £1.7bn of public money.

Ofcom has called for BT to make it easier for rivals to access its network by opening up its ducts and poles.

Image copyright PA

This was welcomed by Inca (Independent Network Co-operative Association), which represents smaller community broadband schemes and has been one of BT's harshest critics.

"For too long, rivals have struggled to make sense of the rules and restrictions surrounding access to BT's ducts and poles," said Malcolm Corbett, Inca's chief executive.

"A few stout-hearted companies are having a go, so steps to make it easier for competitors to use the existing infrastructure are welcome."

For its part, BT said that its ducts and poles had been open to competitors since 2009 but there "has been little interest to date".

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