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Executive Summary

1.1 On 22nd September 2005 Ofcom accepted BT’s undertakings pursuant to section 154 of the Enterprise Act 2002 (“the Undertakings”) addressing Ofcom’s competition concerns through, inter alia, the implementation of what has been termed “Equality of Access” for all communications providers. This document sets out Ofcom’s decision to vary certain of the Undertakings regarding the separation of Management Information Systems (“MIS”) in accordance with the proposals contained in the consultation BT MIS Separation published on 7th September 2006.

1.2 The separation of systems shared between Openreach and the rest of BT is a key part of Equality of Access. A number of sections in the Undertakings refer to these systems including:

• Section 5.45, which requires BT to logically partition its MIS as defined in the Undertakings so that they are run separately for Openreach and the rest of BT by 22nd October 2006 such that they do not lead to undue discrimination against other Communications Providers;
• Section 8.5, which requires BT to logically separate its systems which hold Commercial Information and Customer Confidential Information between Openreach on the one hand and the Upstream and Downstream Divisions on the other.

1.3 In understanding the types of separation Ofcom and BT have found it helpful to identify three levels:

• “Level 1 System Separation” means the application of access rights and controls to ensure that users only have access to data to which they are entitled.
• “Level 2 System Separation" means both separation of systems data and separate instances of the application software such that users can only have access to which they are entitled.
• “Level 3 System Separation” means Level 2 System Separation plus physical separation of the supporting computer hardware;

1.4 Of the 71 MIS previously shared between Openreach and the rest of BT, 58 of them were no longer shared at any level by 22nd October 2006, being put beyond shared use through migration, de-scoping or closure. In our consultation of 7th September Ofcom proposed that:

• For the remaining 13 MIS listed in the Consultation, BT will implement Level 1 Separation from 22nd October until 30th June 2010, after which Level 2 System Separation will apply unless systems are closed or replaced or unless otherwise agreed with Ofcom. The rigour of Level 1 System Separation will be tested by independent external audit.
• By 30th June 2007, following timely consultation with Ofcom and taking into account Ofcom’s comments, BT will provide Ofcom with a roadmap which will set out how BT plans to implement Level 2 separation for the listed MIS systems by 30th June 2010. The delivery of this roadmap will be a binding Undertaking. The roadmap will be a plan and dates in the roadmap will not be binding. BT will agree with Ofcom those elements of the roadmap that are appropriate for publication having regard to BT’s commercial need for confidentiality. Ofcom will publish our view of progress against the roadmap in the ordinary course of our implementation reporting, subject to commercial confidentiality.
• The systems separation referenced in Section 8.5 is clarified: these systems will be subject to Level 2 Systems Separation.

1.5 The variation is not material in Ofcom’s view, however Ofcom considered it appropriate to consult for a four week period because of the level of interest the proposals might generate with stakeholders. Ofcom has received two responses to the consultation. One, from BT, supported the proposals whilst correcting the description of one system Aspire. The second from Cable and Wireless raised three main concerns:

• The level of information provided in the consultation regarding the 13 named MIS and how we had assessed the impact on Equality of Access of Level 1 separation
• The need for the roadmap to be public
• The need for the external audit to include risk reporting and assessment

1.6 With regard to the first two points, it is Ofcom’s view that there will always be information asymmetry between BT and the rest of the industry with regard to BT’s systems and that BT cannot always be expected to share detailed and often commercially sensitive material with its competitors. Whilst BT has shared more detailed information on these systems with Ofcom, our assessment of risk to the delivery of Equality of Access is primarily based on their function as Management Information Systems as well as on the imposition of externally audited access controls. Ofcom does not therefore believe that our assessment of the risk to the delivery of Equality of Access would change were more information publicly available but is including further information on the 13 systems here in the interests of transparency. Ofcom does agree with Cable and Wireless that, allowing for commercial sensitivities, as much as possible of the roadmap should be made public and we shall actively work with BT to ensure that this is the case.

1.7 With regard to the third point, Ofcom agrees with Cable and Wireless that a risk assessment is integral to any professional audit and is including a clarification on the external audit within this statement.

1.8 Overall, in the light of the responses and given the minor nature of the variation, it remains Ofcom’s view that the proposed variation does not constitute a material variation to the Undertakings and that the Undertakings continue to represent a comprehensive solution as is reasonable and practicable to the adverse effects on competition identified. Ofcom has therefore determined to vary the Undertakings as set out in our consultation and summarised in paragraph 1.4 above. The exact wording of the variation can be found in Annex 1 to this statement.

The full document is available below:

• BT MIS Separation - Amendments to section 5 and 8 (separation of systems shared between Openreach and the rest of BT) of the Enterprise Act Undertakings given by BT to Ofcom [pdf]
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