Concern for BT as Ofcom launches UK broadband and mobile review

The UK telecoms regulator has launched a probe into the UK’s digital communications markets, with BT's rivals claiming the market incumbent needs to be further broken up to improve the market for consumers.

Ofcom said it will scrutinise competition, investment, innovation and the availability of products in the broadband, mobile and landline markets.

The "overarching review" will be the regulator’s second major assessment of the wider telecommunications sector, after its first concluded in September 2005 with new rules that forced BT to create its Openreach infrastructure subsidiary that allowed competing providers such as Sky and TalkTalk to access its broadband network, on equal terms, in order to offer phone and broadband services to consumers.

Ofcom said: "The market has transformed over the last decade and hence this review will consider the implications of current and future developments for regulation, including: plans from major operators for significant network investment; telecoms services increasingly operating over the internet; and various potential mergers, acquisitions, joint ventures and partnerships in the sector."

Broker Killik said: "While this review will take some time to complete, there is a possibility that it could be negative for BT and we will be following it closely."

TalkTalk noted that BT's retail division currently has a market share of around 40%, while in wholesale this rises to nearer 70%.

Sky chief executive Jeremy Darroch called for a structural separation of BT of and Openreach, which he said would be "at the heart of creating a sustainable industry; one that provides the capacity and incentive to invest whilst also harnessing the power of multiple competing retailers to drive higher take up and lower prices for customers".

He added: "Ofcom must now take the opportunity to address Openreach’s conflict of interest as a subsidiary of BT or risk extending the problems that are affecting the industry and its customers today."

TalkTalk chief Dido Harding said a separate Openreach would be much better motivated to improve customer service as an independent company.

“It would end BT’s ability to erode competition, stimulating innovation, consumer choice and lower prices,” she said.

“It is increasingly clear that the current market structure is not fit for purpose. BT’s proposed merger with EE threatens to make a bad situation worse."

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