BT Group has unveiled a new business unit branded “openreach” as part of the compromise deal it reached in June with the UK communications regulator Ofcom to avoid being broken up.
The new unit will work alongside BT’s existing retail, wholesale, and global services units, but will principally oversee access to its local network to rivals, and will be responsible for the national local BT network.
Openreach chief executive Steve Robertson said the new business would be run to ensure that the way providers buy and receive network services is completely equal and fair. This launch involves two major aspects, he said. The first is to operate access to the network absolutely transparently, equally, and fairly. That means, whether they are from BT Retail, AOL, or any other provider. The second is to ensure the infrastructure we make available to providers is fit for purpose.
The new unit will employ approximately 30,000 people, 25,000 of whom will be BT engineers. All existing logos will be replaced by the openreach brand in order to distinguish it from BT Group’s other businesses. A new product portfolio is promised within six months.
BT said the new division will be operational from January 2006, and will have revenue of over GBP4bn ($7.16bn) and assets of approximately GBP8bn ($14.33bn). It will also have its own headquarters, although its chief executive Robertson will effectively have to deal with two bosses. On the one side will be the BT board, and on the other will be a newly created Equality of Access board. BT non-executive board member Carl Symon will act as chairman alongside other members who will be appointed in the next three weeks.
The creation of the new division is part of the compromise reached with Ofcom in June. BT had been under a very real threat of being broken up, as rivals felt that BT’s ownership of the last mile of copper wires into homes and business, the so-called local loop, gave BT’s customer-facing arm BT Retail an inherent advantage in the provision of voice calls and internet access services to businesses and households.
A major part of the agreement with Ofcom was the creation of an Access Services business unit to ensure that competitors receive access to its network on the same terms as BT Retail. In return, BT has gained lighter regulation.
There was a mixed reaction from BT’s rivals. The second largest carrier in the UK, Cable & Wireless Plc, was skeptical. BT’s service to its competitors remains inadequate, said C&W chief executive Francesco Caio. One in four customers do not get a service that works on the agreed date. It is that, not the name on the vans, that customers and Ofcom will watch to see if these pledges will deliver the innovation and choice that have eluded UK consumers for too long.
The undertakings announced today represent a significant yet pragmatic step towards creating an open and competitive market for broadband and telecoms services, and we applaud Ofcom for its work to date, said Dave Simpson, head of regulatory affairs at pan-European carrier Easynet Group. The whole industry must now work together to ensure the undertakings are implemented as quickly – and as effectively – as possible. In particular, we must ensure that Local Loop Unbundling remains at the forefront of our efforts.