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LONDON (Alliance News) - Sky PLC Monday called on UK regulator Ofcom to launch a full investigation into the UK broadband market, saying it believes the issues with competition and quality of service are "sufficient" for Ofcom to ask the Competition and Markets Authority to conduct an inquiry.
In particular, Sky argues that historic under-investment in BT Group PLC's Openreach business has led to problems with service quality, and expressed concerns about future competition in the market.
Openreach is BT's infrastructure division, which installs and maintains BT's network. BT was formerly a state monopoly that controlled all of the UK's telephone network and was the only provider of services. But it was made to form Openreach by Ofcom in 2006 as part of measures allowing rival operators to access BT's network.
In its submissions to Ofcom's strategic review of digital communications Sky says that whilst regulation has supported effective competition and new entrants have challenged BT, superfast broadband services are regulated differently and as a result there is a risk of reduction in competition as the UK transitions to services based on the new superfast technology.
Sky says there is "limited scope" for competitors to BT to deliver superfast broadband services through their own infrastructure. It also argues that Openreach "does not deliver 21st century quality of service", citing an excessive number of faults, failures to reach targets for repairing faults, long waits to have new lines installed, missed appointments and incomplete jobs.
Sky is working with TalkTalk Telecom Group PLC and CityFibre Infrastructure Holding PLC in a joint venture to construct a city-wide fibre network in York, independent of BT's infrastructure, with plans to bring a similar service to further cities in the future.
Amongst other issues discussed in its submission, Sky also renewed its argument for Openreach to be separated from BT, suggesting there would likely be "significant net benefits from establishing Openreach as an independent company."
Sky, amongst other competitors, has called for Openreach to be separated from BT in the past over concerns surrounding the fairness of BT both running services and controlling the infrastructure that services are run on.
In March, when Ofcom announced its strategic review of digital communications in the UK, Sky Chief Executive Jeremy Darroch called on Ofcom to address the "conflict of interest" in BT owning Openreach. TalkTalk Chief Executive Dido Harding also called on Ofcom to address the issue, highlighting BT's proposed acquisition of EE Ltd as a further concern.
BT's acquisition of EE has been fast-tracked to a deeper investigation by the CMA at BT's request as the competition watchdog said there is a "realistic prospect of a substantial lessening of competition."
Sky noted Monday that a reason Ofcom has given in the past for not undertaking a market investigation reference was that there was little support among other operators for the option of structural separation, however Sky says this is "no longer the case."
"There is now significant support within the sector for, at a minimum, a thorough consideration of the potential costs and benefits of separation," Sky argues.
Sky argues that the separation of Openreach would create a level playing field for competition, promote investment in alternative infrastructure, improve Openreach's performance and simplify regulation. Additionally, in addressing the suggestion that the process of divesting Openreach would be complex, Sky says the process would be less complex than integrating the businesses of BT and EE, "which BT is fully prepared to undertake in the event that its proposed merger is completed."
Sky concedes that this does not mean there would be "no difficult issues" to be addressed in separating Openreach, but believes "the most significant of these issues are regulatory in nature ? for example, what activities Openreach would be permitted to undertake in future. And these issues are of no greater complexity than many dealt with by the CMA or Ofcom on a daily basis."
"We believe that Ofcom should move quickly to ask the Competition and Markets Authority to undertake a full competition inquiry. A reference to the CMA would allow these vital issues to be examined with increased speed and thoroughness by a body with the powers to take whatever action should be deemed necessary. Given the rapid changes taking place in the sector, we believe this should happen as soon as possible," said Chief Strategy Officer Mai Fyfield in a statement.
Shares in Sky are trading down 1.2% at 1,053.00 pence Monday afternoon, shares in BT are trading down 0.6% at 461.35 pence.
By Hana Stewart-Smith; hanassmith@alliancenews.com; @HanaSSAllNews
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