Ofcom Announces More Detailed Plans from its Strategic Review of Digital Communications

On 25 February 2016, Ofcom published its initial conclusions from the Strategic Review in a comprehensive Statement. Today, Ofcom announced further details on how it proposes to achieve the following key objectives addressed in these initial conclusions:

• ensuring greater independence for Openreach;
• increasing investment in fibre networks; and
• achieving better quality of service across the telecommunications industry.
• Set out below is some background to the Strategic Review and a summary of the more detailed plans announced by Ofcom today.

Background to the Strategic Review

The Strategic Review is aimed at examining changes in the way consumers use digital communications. It comes at a time when the UK electronic communications sector is going through a period of unprecedented change. Market consolidation, together with BT's push into the pay TV market, is reshaping the industry. In addition, the growing dominance of alternative communication via over-the-top ("OTT") services, such as WhatsApp and Facebook, is challenging traditional business models.

The Strategic Review was intended to address the following broad issues:

• efficient investment: Ofcom is seeking to ensure that efficient private sector investment and innovation is maintained and strengthened;
• competition: Ofcom is exploring what should be the focus of competition policy in future networks; and
• deregulation: Ofcom is investigating whether there is scope for deregulating networks and services downstream of any "enduring bottlenecks".

Overview of the more detailed plans announced by Ofcom today

1. Increased independence for Openreach

As part of its initial conclusions in February, Ofcom announced that Openreach would become more independent from the BT Group. Today, it set out the following proposals for consultation on how to ensure that Openreach acts more independently from the BT Group:

• Openreach will be a legally separate company within the BT Group that would be required to make decisions in the interests of all its customers;
• Openreach will have its own Board with a majority of non-executive directors who are not affiliated to the BT Group in any way; these non-executive directors would be both appointed and removed by BT in consultation with Ofcom;
• Openreach would be obliged to consult formally with wholesale customers such as Sky and TalkTalk on large-scale investments without BT being privy to these discussions initially;
• Openreach should own the physical network that it manages, which would allow it to make decisions that depend on investing in, and looking after, the assets that it controls;
• Openreach should develop its own strategy and annual operating plans, within an overall budget set by BT Group; and
• Openreach should have its own brand that is not affiliated with BT Group.

According to Ofcom, the proposed model would

"[…] provide Openreach with the greatest degree of independence from BT Group that is possible without incurring the costs and disruption - to industry and consumers - associated with separating the companies entirely."

2. Facilitating greater investment in fibre networks

In its initial conclusions on the Strategic Review from February, Ofcom committed to improving access to Openreach’s telegraph poles and ducts. This is aimed at encouraging the roll-out of new "fibre to the premise" networks to homes and businesses that will serve as an alternative to BT’s planned innovation in copper-based technologies. Openreach will also be required to provide an online database showing the physical location and characteristics of its ducts and poles.

Ofcom announced today that BT has already started trials of new, simpler processes for sharing its network, working with five other telecoms companies. Ofcom will set out further detail on improved duct and pole access in the autumn.

In addition, Ofcom referred to new rules that will come into force in the UK on 31 July that will give telecommunications network operators further rights to access physical infrastructure and are designed to reduce the cost of deploying broadband networks^[1].

3. Better quality of service across the industry

As part of its initial conclusions from February, Ofcom also announced a range of measures designed to ensure that all telephone and broadband companies provide a quality of service that UK customers expect.

Today, Ofcom summarised the steps that it has taken to ensure greater service quality and coverage, which include the following:

• Ofcom began discussions in June 2016 with industry stakeholders on the payment of automatic compensation to customers when minimum levels of service quality are not met;
• In March 2016, Ofcom published proposals for simpler and swifter mobile number portability and is planning on publishing similar proposals for landline, broadband and pay-TV services soon;
• Ofcom has gathered evidence for the government on how the universal broadband service requirement proposed under the Digital Economy Bill should be designed; and
• As part of its ex-ante review of the UK business connectivity market Ofcom, has introduced new rules in March 2016 that require BT to provide access to its fibre network of high-speed business lines.

Ofcom will continue with this work over coming months.

[1] These rules, which are set down in the Communications (Access to Infrastructure) Regulations 2016, transpose into UK law Directive 2014/61/EU on measures to reduce the costs of deploying high-speed electronic communications networks (OJ No L 155, 23.5.2014, p.1).