Should Ofcom force BT to cut the cord?
Openreach was spun off from its parent BT in 2005 during Ofcom’s last review of the digital communications market.
Now, ten years later, the future of BT’s infrastructure division is again up in the air as Ofcom mulls a split as one of four options, the others being strengthening the current model by applying new rules to BT, retaining the current model and deregulating and promoting competition between networks.
Public opinion seems to be overwhelmingly in favour of splitting the division. A poll on thinkbroadband.com, the broadband information site, saw 69.1 percent voting in favour of the split.
The same goes for BT’s rivals, in particular Sky and TalkTalk who argue that their service from BT Openreach is fundamentally degraded by a conflict of interest.
For example, in a detailed submission to Ofcom, Sky claimed that 90 percent of new line installations take 10 calendar days or longer and one in ten takes longer than 30 days, while claiming that Openreach changes installation dates around 36,000 times a month, misses over 500 appointments each month and fails to complete 4,000 jobs per month.
CBR has collected some thoughts from industry stakeholders and experts on whether Ofcom should go ahead with the split.
"We welcome this review and are confident it will find the UK broadband market to be both vibrant and healthy. There has been huge progress this past ten years with an explosion in competition and broadband usage.
"Consumers are getting more for less and the UK has outpaced its European peers in terms of superfast broadband. As Ofcom say today, ‘This approach has delivered real choice, quality and value for phone and broadband customers over many years’.
"Much of that progress is down to BT investing billions of pounds in fibre at the height of the recession. That investment wouldn’t have occurred had BT been split in two a decade ago and our ambitious plans for ultrafast broadband also depend on BT remaining intact.
"Ofcom have overseen a regime that has balanced investment with competition and we hope they will once again put the needs of the UK and its consumers ahead of those who have tried to keep the UK in the digital dark ages.
"The one area where consumers are getting a raw deal is Pay TV. There is no reason why UK consumers should pay half a billion pounds more a year than the European average.
"Ofcom have said they will consider whether to make it easier for customers to switch in this area but this isn’t enough. Much tougher action is needed to address the fundamental flaws in this market."
"One of the benefits of separating Openreach from the rest of BT that is often overlooked is giving BT’s retail business the ability to contract with other operators for the provision of inputs to its business."
"Currently, it would be unthinkable for BT Consumer to consider purchasing inputs from a rival to Openreach, such as Virgin Media or other potential investors in telecoms infrastructure. BT Consumer is, in practice, a captive customer for Openreach."
"Plainly, in common with most CPs, BT Consumer would continue to purchase the vast majority of its inputs from Openreach. However, a proportion of BT Consumer’s requirements would become contestable.
"This could have a significant impact on Openreach’s incentives, and the incentives of other operators to invest in alternative infrastructure."
3. Dido Harding, CEO of TalkTalk:
"A decade ago, Ofcom failed to break up BT and instead created Openreach. Whilst the last ten years have seen a lowering of prices and increased take-up, it is increasingly clear that the current market structure is not fit for purpose.
"BT’s proposed merger with EE threatens to make a bad situation worse. It will further starve Openreach of the focus and capital it needs and will extend BT’s dominance of the market. The larger group will have nearly 40% of the entire consumer telecoms market and nearly 70% of the wholesale market.
"It is crucial that we now seize this opportunity to structurally separate Openreach. A fully independent Openreach focused exclusively on infrastructure would be incentivised to maximise coverage and improve quality of service for customers. It would end BT’s ability to erode competition, stimulating innovation, consumer choice and lower prices.
"Separation would accelerate investment in Britain’s digital infrastructure as other providers will have the level playing field they need to build the competing modern infrastructure that our economy desperately needs. Ofcom’s review is very timely and is a crucial first step to securing a market that delivers for Britain."
4. Askar Sheibani, chair of the Deeside Business Forum, CEO of The Comtek Group:
"I’m pleased to see Ofcom considering splitting BT from Openreach. It is in communities such as Deeside, North Wales that the lack of competition and access to affordable superfast broadband has caused major unease and business concern.
"If the proposed split goes ahead, the broadband market will see an increase in competition, which will consequently drag down prices for businesses and consumers. Not only this, but the revenue generated from the sale of Openreach should enable BT to spend more on infrastructure and innovation.
"BT will have the opportunity to ensure its network is not only as reliable as possible but that it reaches all corners of the UK, an effort that will prevent the social exclusion caused by a lack of connectivity and fuel economic growth in regions that have previously been effectively ‘cut off’. I’m confident that the split of BT from Openreach will be win win for all."
5. Chris Jagusz, CEO of Azzurri Communications
"I’ll declare an interest here; I was one of the first two dozen people in Openreach, and I helped build it. I’ve always believed in the Openreach mission to treat its customers equally.
"It might treat them all equally badly, or equally well – but either way, I believe that Openreach does not offer any better service to BT Retail or BT Global Services than it offers to my company, Azzurri Communications.
"However, as the market for competitive fibre networks has started to open up I’ve become increasingly uncomfortable with the idea of BT having a captive nationwide fibre operator in the form of Openreach.
"It’s hard to imagine that BT’s investment decisions for Openreach aren’t taken with at least half an eye on the benefits for its retail businesses. What’s good for BT Retail and BTGS isn’t necessarily what’s good for the industry as a whole.
"It’s had ten years in which to grow up. It’s time Openreach broke free of its parent and started to make investment decisions based on the needs of all consumers, not just those that BT wants as customers; of UK plc, not just BT plc."
6. Rob Hilborn, head of strategy for the broadband comparison website Broadband Genie:
"I think the pro-split campaign needs to be careful what it wishes for. It’s easy to paint BT as the bogeyman, but it’s the company charged with getting broadband to everyone, making it an easy target.
"The likes of Sky and TalkTalk complain without offering solutions and Virgin stops laying cable at the first sign of a dip in profits. Where were TalkTalk and Sky in the rural broadband bids, for example?
"But if pushed, I would vote to split Openreach from BT – but only if the other networks were going to put their money where their whining comes from and get behind giving broadband users across the UK the broadband they deserve – not just in the more profitable towns and cities.
"The networks talk constantly about ‘fair competition’, when what people want is simply good broadband for all."