Ofcom faces calls to break up BT

Sky and TalkTalk demand Openreach is split from telco giant

Ofcom is to carry out a wide-ranging investigation on the UK's telecoms market, leading to calls from rivals to break up BT.

The watchdog is to commence an overall strategic review into the sector to evaluate competition, investment and innovation across broadband, mobile and landline markets.

Ofcom has reviewed each of these markets separately every three years in the past.

The regulator is aiming to find out just how well rules set in place ten years ago have worked, after 2005's review led to BT's access network being separated from the rest of the company, creating a new firm called Openreach.

Three different areas will be the focuses of the review: 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.

According to Ofcom acting chief executive Steve Unger, major changes have taken place since the previous review with the advent of tablet, HD streaming and 4G networks.

"The boundaries between landline, mobile and broadband services continue to blur, and people are enjoying faster services on a growing range of devices," said Ungar.

"Our new review will mean Ofcom's rules continue to meet the needs of consumers and businesses by supporting competition and investment for years to come."

The initial phase of the review will examine current and future market factors that may affect digital communications services, and current regulatory approaches.

It will also be looking to ensure the right incentives exist for private sector investment, maintaining strong competition by removing bottlenecks and whether there is scope for further deregulation.

However, BT's rivals called for the complete separation of Openreach from BT.

TalkTalk chief executive Dido Harding said spinning off the firm would force the subsidiary to maximise coverage and improve quality of service for customers.

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

"Separation would accelerate investment in Britain's digital infrastructure as other providers will have the level playing field they need to build the competing modern infrastructure that our economy desperately needs.

"Ofcom's review is very timely and is a crucial first step to securing a market that delivers for Britain."

Sky's chief executive, Jeremy Darroch, said that structural separation of Openreach would be "at the heart of creating a sustainable industry".

"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," he said.

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