Today's tentative decision by Ofcom not to force the break-up of BT (BT.A) and its UK communications backbone workhorse Openreach will surprise few that follow the UK telecoms industry. The UK watchdog is caught between Scylla and Charybdis.
On the one hand, Ofcom wants to encourage competition and investment in a 21st Century superfast communications infrastructure. On the other, it cannot afford to put existing capex plans and budgets at risk.
Which always made a fudge the likely outcome. The process is still ongoing and Ofcom is still asking for new ideas but it is difficult to see a real alternative. What is on the table, and the most likely outcome, is one put forward by BT itself. It promises a separate Openreach company with its own board of directors but still planted in the bosom of its parent.
Investors certainly like the idea, sparking a buying frenzy in BT stock that powers a 4%-plus jump in the share price to 403.3p, heading the Footsie leader board on 26 July.
For others, mainly BT's competitors, this simply does not go far enough.
'Fundamentally, today’s proposals do not address Ofcom's key objectives of reducing the country’s dependence on Openreach and encouraging essential investment in fibre,' says Mark Collins, strategy and policy director at CityFibre (CITY:AIM), the company gradually building its own alternative network. 'Whilst correctly identifying Openreach as the principal source of the industry’s dysfunction, it is hypocritical of Ofcom to focus on a restructured Openreach as a panacea,' he says.
Well, he would. An arguably more independent view comes from Ovum's Matthew Howett.
'In many ways, a voluntary agreement between Ofcom and Openreach, which is backed by the rest of the industry, would achieve more than years in court and a forced enhanced model of separation could,' the analyst says.
'Many of the things proposed by Ofcom, and that are being offered by BT, could be enacted within months. Attention and money could then turn to getting on with delivering what this review is ultimately all about - making sure Britain has the broadband infrastructure fit for the next decade.'
'Further debate and navel-gazing as to the appropriate structure of BT will continue to create a period of uncertainty at a time when the industry needs clarity, direction and competitive investment,' counters CityFibre's Collins. 'Openreach has a critical role to play, but it is not prudent to entrust them with sole responsibility for our digital future.'
The industry has until 4 October to respond to Ofcom's plan.