Did Ofcom bottle it?
The pressure on Ofcom in the build up to its decision on BT Openreach focused on whether it would force structural separation of the infrastructure division. The indication from Ofcom in February was that it wouldn’t go the whole way. It made today’s announcement a disappointment rather than a surprise for many of its rivals.
That said, within the wider media Ofcom has been portrayed as losing its nerve where Openreach is concerned. It should be noted that the new measures will certainly bring a number of different influences within the Openreach organisation. The critical point will be how much power they are able to exert and how able they are to influence the direction of the infrastructure arm.
A repeated theme within Ofcom’s proposals was the notion that Openreach should be changed so it had a separate business culture. Staff would no longer be BT employees and it would have ‘its own brand, not affiliated with BT Group, to help embed the organisational culture of a distinct company’.
This will be the most difficult change for Ofcom to enforce. BT staff have notoriously long tenures, a new brand and a change of employer’s name might have a superficial benefit. But it will take a whole lot more to transform how these staff understand the company they work for. It’s one thing to establish a system which roots out preferential treatment. But it’s quite another to change the way in which 28,000 employees view themselves and the business they work for.
No clear winner
Despite it being portrayed as a victory for BT in avoiding structural separation, the main beneficiary of these proposals is unclear. The telecoms giant won’t be enamoured with the prospect of pricey restructuring costs and a complicated new management structure.
Rivals will be annoyed that the regulator has failed to force BT into full separation, and have also expressed anger at a perceived lack of consultation. The greater involvement in consultation on large scale investments will be welcomed by the likes of Sky and TalkTalk. However, there will be the strong feeling that there should have been more.
Ofcom has been characterised as being blunt. They have sought to avoid the potential chaos and undoubted hostility from BT that full separation would have caused, which is understandable. But they’ll need to prove that these measures can actually have an impact.