Sky calls on Ofcom to refer telecoms market for investigation by competition authority

In a submission to Ofcom (32-page / 974KB PDF) as part of the regulator's strategic review of digital communications, the broadband provider said that the "market investigation reference" (MIR) was justified because there are reasonable grounds to suspect that competition in the UK's superfast broadband market could be prevented, restricted or distorted as a result of features that exist in the market.

Competition could be affected in this way because of BT's "enduring upstream market power, associated with its ownership of long-lived, ubiquitous telecommunications infrastructure" and because of the "vertical integration" of its business across the customer-facing and network-operating markets, Sky said. It said that BT's Openreach division, tasked with connecting businesses and consumers to the internet, "does not deliver 21st century quality of service" and that this is another feature of the market that raises competition concerns.

"The quality of service delivered to consumers by Openreach falls far short of an acceptable standard, including: an excessive number of faults, failure to meet targets for repairing faults, long waits to have new lines installed, constantly missing appointments and, when appointments are met, often not completing jobs," Sky said. "These quality of service problems have a direct impact on consumers and small businesses in the UK, resulting in dissatisfaction and significant detriment. However, they also affect competition in the market by discouraging consumers from switching services – a status quo that favours BT."

Sky said that if BT is able to increase its share of the superfast broadband market then it would have an impact on the ability of rival broadband providers like Sky to invest in infrastructure to support alternative superfast broadband services.

Sky said that Ofcom should consult on making a MIR "swiftly". In practice this means that it should consult on the MIR in January 2016, when Ofcom is expected to outline the actions it intends to take as a result of the digital communications review, Sky said.

Ofcom's review is aimed at ensuring telecoms companies have the incentive to invest in their infrastructure and to innovate. The regulator has said it is also aimed at establishing future competition policy in the market.

Earlier this year, BT chief executive Gavin Patterson said that it "would be difficult to convince the board of BT to invest" in broadband infrastructure improvements if the company was forced to sell off its Openreach division.

In response to Sky’s Ofcom submission, BT said: “The forthcoming Ofcom review is an important piece of work so it is disappointing that Sky are engaging in selective spin rather than constructive dialogue. They claim that Openreach investment is down yet it is up. They can only substantiate their claim by ignoring the billions of pounds we have pumped into fibre broadband. They also make claims about customer service whilst failing to acknowledge that Openreach has passed all sixty of the service targets it was set by Ofcom.”

“We acknowledge there is more to do on customer service but breaking up BT is not the answer. It would lead to huge uncertainty and fundamentally undermine the case for future investment dragging the UK backwards at the very time it needs important investment in its infrastructure,” BT said in its statement.