Ofcom Digital Communications Review: Ofcom’s interim statement – discussions to continue

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Ofcom Digital Communications Review: Ofcom’s interim statement – discussions to continue

Ofcom has issued a further interim statement today about this review. They have announced that they are pressing ahead with their proposals for the ‘separate legal incorporation’ of Openreach. This is not new – this is what Ofcom proposed back in July when they published their interim findings. In that July report, they proposed that Openreach should become a wholly owned subsidiary of BT, with its own Articles of Association, and that is what they are still proposing. The issues for our members – particularly our members in Openreach – are, what would this mean in practice, how would it be done and what would the implications be, particularly for pensions, job security and terms and conditions of employment?

The union, together with the CWU, has expressed a series of concerns and made a series of points to Ofcom about this, in the evidence we submitted to Ofcom in response to their July statement. You can read that evidence here https://library.prospect.org.uk/id/2016/September/23/CWU-Prospect-Joint-Submission-Ofcom-DCR-Sept-2016.

 From this evidence, you will see clearly what our concerns are. In summary, we have said the following:

  • The transfer of assets from BT to Openreach (eg ducts, poles, buildings, exchange equipment etc) would be impossible in engineering terms and could therefore only be done in a wholly arbitrary way. It would be endlessly complex and expensive to accomplish and would do nothing for customer service or in itself add a penny to the amount BT could invest in the network. In fact it could reduce the amount available because it would be a very expensive thing to do. A transfer of assets would, in a legal sense, also make it very hard for us to avoid a TUPE of Openreach’s employees to Openreach, which would give us great cause for concern – see below.
  • Separate legal incorporation could well be problematic. A key issue would be, who exactly would be making decisions and who would the CEO of Openreach actually be accountable to? But, for the unions, this is perhaps not the most significant issue of all in Ofcom’s proposals. Note that BT has tacitly accepted separate legal incorporation, and has today announced the appointment of a new independent Chair of an Openreach Board. In itself, this aspect of Ofcom’s proposals is not that significant to us and to our members.
  • A situation where everyone in Openreach has to TUPE transfer to Openreach could well be highly problematic. If, for example, this resulted in our members in Openreach no longer being able to be active members of the BTPS this would be ABSOLUTELY UNACCEPTABLE to both Prospect and the CWU. But in fact Ofcom do seem to understand the deep significance of this to our members, and say they are seeking to ensure that there is a framework to enable membership of the BTPS to continue. We would also be concerned about job security and terms and conditions of employment in the context of any TUPE – and we have been very clear with Ofcom (and with BT) about this. Our very strong preference would be to ensure that any massive TUPE is avoided, and again we have been very clear with Ofcom about that.
  • Any proposals from Ofcom which undermined the BT Pension Scheme Covenant (the ability of BT to stand behind the BTPS as the scheme’s sponsor) would be unacceptable to us, and would also be an own goal for Ofcom, as it would result in the BTPS deficit becoming in our view substantially larger, and that would in itself POTENTIALLY MASSIVELY undermine investment in the network. You will see from our evidence that we have pressed Ofcom very hard on this. The BTPS Trustee has also submitted evidence on this and has made exactly the same point.

Contrary to some of the headlines that the press has published today, this process is not at an end. In process terms, what Ofcom has actually said is that it is taking a twin track approach:

  • On the one hand, it hopes to reach an agreement with BT about the nature of this separate legal incorporation of BT (this is not a change from its position in July, when it was saying exactly this)
  • On the other hand, it is also preparing for a situation where no agreement is reached, in which case it would need to issue a ‘Notice’ to the European Commission effectively asking for the EU’s agreement to its proposals. Should no agreement be reached, the issue goes to the European Commission, which would then need to embark on its own consultations – where one of the bodies it would formally consult would be the trade unions, as that requirement is written into the European legislation. This is not new either. This was what Ofcom was saying in July.

We and the CWU will continue to make representations to Ofcom, and continue to remain in close contact with BT over this issue. Whilst this issue is now moving to a conclusion, it has not reached that point just yet. When it does, we will of course communicate further.