Photographer: Chris Ratcliffe/Bloomberg

U.K. Rules BT Group Must Open Up Broadband Network

  • Regulator Ofcom stops short of ordering BT to break up
  • Rivals repeat calls for complete separation of Openreach unit

BT Group Plc avoided a breakup as U.K. regulators ordered the former phone monopoly to grant competitors including Sky Plc and TalkTalk Telecom Group Plc better access to broadband networks, but stopped short of demanding a full spinoff of the Openreach unit.

BT share rose in London Thursday after Ofcom regulators said the company must allow physical access to its telephone poles and underground tunnels, letting rivals take direct control of the connections, following a review of the U.K. phone industry. BT presently resells service to other carriers at regulated rates through Openreach.

Rivals have accused BT of market domination and called for a full breakup. Ofcom didn’t go that far, saying only that Openreach must strengthen its independence and have control over decision-making and budgets. The new model may require Openreach to become an autonomous subsidiary of BT, with its own purpose and board members, Ofcom said, even as it reserved the right to order a full separation in the future.

“I don’t think we are perfect; there are areas where we can improve,” BT Chief Executive Officer Gavin Patterson said in an interview on BBC Radio Four. He said BT’s network has been open to rivals since 2009, but that no competitors have sought to access it. Separating Openreach from BT would be a “massive undertaking,” he added.

BT shares gained 2.8 percent to 471.1 pence in London at 10:11 a.m. TalkTalk shares fell 1.6 percent to 214.4 pence. Sky’s stock rose 1.3 percent.

TalkTalk CEO Dido Harding said in a statement the Ofcom demands didn’t go far enough. “Ofcom has produced 100 pages of consultation with little concrete action behind it," she said. "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."

BT said Openreach is already one of the most heavily regulated businesses in the world and that the company has volunteered to accept tighter regulation to bring matters to a "clear and speedy conclusion."

Openreach in October pledged to make improvements that would give about 10 million connections faster speeds of 300-500 megabits per second.

"The evidence from Ofcom’s review shows Openreach still has an incentive to make decisions in the interests of BT, rather than BT’s competitors, which can lead to competition problems,” Ofcom said in its statement.

Breakup ’Better’

An Ofcom ruling to break BT up would have been better for the U.K. broadband industry, said Dan Howdle, a telecoms analyst at broadband and phone advice site Cable.co.uk.

“Ofcom’s decision to open up Openreach’s poles and tunneling to competitors and to give them more say in future strategic and budgetary decision-making goes halfway to alleviating competitor complaints, but stops short of addressing the prime concern,” Howdle said.

Sky reiterated its call for BT to break off Openreach, saying that the simplest and most effective way to fix a "broken market structure" is for the unit to be completely independent. "We are pleased to see that separation is still on the table," the company said in an e-mailed statement.

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