Ofcom must break up BT as part of review, rivals say

BT's rivals are pressuring Ofcom to break up the former incumbent as part of the regulator's latest review into the UK's digital communications market, which Ofcom opened on Thursday (Mar. 12).

TalkTalk said the review is an opportunity to separate Openreach from the rest of BT, the Financial Times reported. Openreach is BT's infrastructure division that was split out into a separate division in 2006 following the last Ofcom review of the market, in a bid to improve access to BT's wholesale networks by its competitors.

Dido Harding, CEO of TalkTalk, said Ofcom did not go far enough in its 2005 market review, telling the FT that while wholesale prices have fallen over the past decade, the country has been left with a wholesale market structure that is "not fit for purpose."

Harding's views were echoed by BSkyB CEO Jeremy Darroch, who told the newspaper that Openreach is conflicted because it remains a unit of BT.

BT's rivals are increasingly concerned after the operator entered into exclusive talks to acquire mobile operator EE. The FT cited research company Macquarie, which notes that the deal would create a fixed-mobile operator with around 33 per cent of the UK consumer market, and 70 per cent of the wholesale sector.

Ofcom announced that it would review competition, investment, innovation and the availability of products in mobile, broadband and fixed-line services. The regulator expects to focus on three key areas: ensuring the private sector is incentivised to invest in the market; maintaining competition while removing any blockages to market development; and examining the potential to deregulate some parts of the market.

Steve Unger, Ofcom's acting chief executive, explained that the review is necessary to account for "huge changes in the phone and broadband markets" over the past decade, including the launch of tablet PCs, LTE (4G) mobile broadband and high-definition video streaming.

"The boundaries between landline, mobile and broadband services continue to blur," Unger noted, adding that the review will mean Ofcom's rules continue to meet the needs of consumers and businesses by supporting competition and investment for years to come.

Ofcom aims to complete the first phase of its review by the summer, when it plans to produce a discussion document based on initial consultations with industry and government. A second phase, outlining the initial conclusions of those talks, is due to be completed by the year-end.

For more:
- see Ofcom's review announcement
- read this Financial Times article (sub. req.)

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