Britain’s telecommunications watchdog is reviewing a possible breakup of BT Group Plc by forcing the country’s biggest phone company to separate its Openreach unit that leases its network to rival carriers.
Ofcom’s update on its strategic review of the digital communications market -- the first in a decade -- said its options included splitting off Openreach or letting BT keep the network but with tougher rules and more competition.
BT has the country’s biggest physical network and resells service to others at regulated rates. Ofcom is studying how regulation can improve the development of high-speed broadband and said 8 percent of U.K. households can’t access that speed. The review started in March and is examining the difficulties of U.K. consumers receiving high-quality services.
“The incentive for BT to discriminate against competing providers can be limited by regulation, but not removed entirely,” the regulator said, adding it was concerned Openreach’s performance on behalf of providers is often poor.
Most U.K. operators use BT’s Openreach network: Vodafone Group Plc, TalkTalk Telecom Group Plc, EE Ltd. and Hutchison Whampoa Ltd.’s Three all buy regulated wholesale access to the infrastructure to resell to customers. Rupert Murdoch’s pay-TV company Sky Plc has been arguing for the breakup of BT.
Should Openreach be separated from BT, it would create a more level playing field, said Neil Campling, a senior analyst at Aviate Global in London.
“We could end up with Sky being more of a competitor and bigger threat to BT, and it would help TalkTalk with its positioning as well,” said Campling. “It is a major change and signal from Ofcom. No one had the guts to take on BT before and Ofcom is doing just that.”