UK - functional separation terms toughened

New incentives for Openreach to deliver customer service improvements
see also statement

Ofcom today confirmed a new package of incentives for Openreach to offer a high quality of service to other communications providers. The measures will affect the way Openreach products are provided, supported, repaired and maintained.

The new rules require Openreach to compensate all communications providers (including BT’s own retail divisions) where it fails to provide and repair services according to agreed targets. Ofcom has also simplified the process for claiming such compensation.

The rules require Openreach to:

* pay compensation proactively without any need for Openreach customers to make a claim should a fault be fixed late or a line provided late;
* pay every time service or quality falls below the contractual threshold instead of paying out against performance stated as an ‘average over time’;
* continue to pay compensation each time problems persist up to a capped limit; and
* for local loop unbundling, pay additional levels of compensation for failure to activate ‘live’ lines at double the current amount.

Telecoms companies use a range of Openreach products to allow them to offer retail services to business and residential consumers. As these products are only available from Openreach, Ofcom regulates their price and how they are supplied.

Openreach is required to provide these products on an equal basis, with the same prices, sales and support processes to the entire telecoms industry. Specifically, Openreach should not provide services to other parts of the BT Group on more favourable terms or practices.

The package of measures follows concerns raised by telecoms companies that Openreach was not sufficiently focused on meeting the needs of all of its wholesale customers. In particular, other communications providers were concerned about the time and complexity involved in claiming compensation resulting from a service failure.

These new measures will relate to most of Openreach’s products including:

* wholesale line rental – used by communications providers to offer telephone services to consumers over the BT network;
* local loop unbundling – allowing communications providers to install their own equipment in telephone exchanges to offer their own retail services including broadband; and
* wholesale Ethernet services – where communications providers use these products to build their own retail services for the business and enterprise market or to extend their own networks.

Ofcom Chief Executive, Ed Richards, said: “Openreach’s role is to sell products to any communications company wishing to provide services to UK customers. The new incentives will encourage Openreach to ensure that a high quality of service is delivered to industry and ultimately consumers”.

The new rules will take full effect from 20 June 2008.

Ofcom will review the impact of the service guarantees six months after their implementation. Ofcom will also be considering quality of service issues in its review of the Openreach Financial Framework in spring 2008.