Connected Research

Union policy research in the 21st century

Ofcom reviews BT Undertakings

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Ofcom, the regulatory authority for the UK’s communications industry, has produced two linked pieces of work on the Undertakings that BT gave in 2005 concerning its internal structure.

The Undertakings concerned the commitments given by BT to equivalence of input (by which BT would provide wholesale network services to all retail providers on a non-discriminatory basis), requiring in turn the functional separation of its delivery and systems functions (leading to the creation of Openreach). This was a solution to the competitive concerns identified by Ofcom which, otherwise, would have led to a Competition Commission reference.

The first piece of work is a review by Ofcom of the factors which led to the Undertakings being given – its third. It believes that the net effect of the Undertakings to date has been positive, but that it is at a critical juncture at which next generation access and core networks are coming on stream which may change the validity of the Undertakings. Nevertheless, for the time being, Ofcom believes that the Undertakings have delivered ‘substantial’ benefits to retail and wholesale customers to date and thus it remains of the view that ‘the Undertakings are an appropriate and comprehensive solution to … competition concerns.’

There nevertheless remain concerns over systems issues and the management platform over which Openreach delivers the equivalence of input obligations to all communications providers.

Further work on these issues is the subject of the second piece of work here, a consultation document on re-prioritising parts of the Undertakings which depend on the programme of separation of information systems between Openreach and other parts of BT. This was originally required so that other BT businesses would not be able to access information concerning Openreach’s provision of services to other communications providers and was due to have been achieved by June 2010. For new systems put in place subsequent to the creation of Openreach, this has been simple since they have been designed with separation in mind, but problems remain over meeting the deadlines concerning legacy systems, specifically the migration of BT’s legacy retail customer records to systems which are separate from Openreach.

BT has consequently requested a re-prioritisation of these obligations as a result of the increasing pressure that its systems resources have been coming under. Ofcom, which has been working on these proposals since early December, is thus proposing to relieve BT of the deadlines originally set out in these aspects of the Undertakings, in return for ensuring that Openreach delivers, as a part of the Undertakings, a set of new service developments in addition to developing enhanced functionality for existing ones.

If the proposals are supported, BT would remain committed to full physical systems separation, albeit not to the original timetable, but would gain flexibility to continue with the separation of legacy systems according to more pragmatic considerations but without a finite date. BT would also have to prioritise the separation of customer records above other aspects of separation, a form of separation which, Ofcom concludes, is particularly important in addressing potential competition concerns. Finally, the remaining milestones for BT to migrate its installed customer base to equivalence of input products would be removed from the Undertakings and replaced by new progress milestones based on the percentage of customers that have been migrated to equivalence of input products both by June 2010 and December 2012.

Ofcom is confident that its proposals do not depart from the aims which led to the establishment of the Undertakings and are consistent with the outcomes that the Undertakings set out to achieve; in particular, that they maintain a continued path towards functional separation and to the delivery of equivalence of input products albeit over a longer timescale for some systems and products. BT will gain from being able to be more flexible in the deployment of its development and capital resource, essentially by no longer having to commit systems design specialists to working essentially on unproductive work, allowing them instead to work on more rewarding, fresh design projects.

Connect will be considering further the issues raised by the consultation, which closes on 10 July.

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Written by Calvin

29/05/2009 at 6:06 pm

Posted in Telecoms regulation

Tagged with , , ,

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