UK takes a bullet for BT
July 26, 2016
A number of headlines today advise that BT has dodged a bullet as Ofcom has not forced it to sell Openreach. The market agrees, and BT shares picked up 3 per cent on the news. Meanwhile, shares in UK plc sunk further than ever as the bullet BT dodged further wounded the country’s already bleeding Brexit body.
Bottom line, after all the ifs and buts, is that the UK will continue to be poorly served in terms of speed, reliability and innovation in its broadband infrastructure. In a country that already had the lowest productivity among front rank EU neighbours, and has just taken a decision guaranteeing inward investment will stall in the near term, this is seriously not good. It’s like our economy has taken a bottle of Scotch and a revolver into the study and is thinking over its’ mortality.
BT has done absolutely nothing to deserve this reprieve. It has won it – as Ofcom tacitly admits – on the back of history – the history of its enormous state-guaranteed pension fund, its enormous pension fund deficit, and the truly horrendous complications and potential liabilities of trying to split that out into a genuinely independent company.
Genuine independence only comes from genuine separation of ownership. As a separate company, Openreach could plan a network that serves its shareholders with a super high-investment, long term, super high speed, super high ROI for its new investors committed to a strategy that delivers a genuinely open, genuinely high speed network for the UK.
While Ofcom has done its best, all its stringent new terms and conditions are really just rearranging the furniture. In the end of the day, Openreach still belongs to BT and it has demonstrated it wants to invest the bare minimum at every stage to keep the infrastructure from completely falling over. BT and the government spin hard the ‘We are Europe’s leading digital economy’ line because it suits their agendas of ‘We’re doing a great job’. What they mean, is we have more people connected to a rubbish network than anyone else. Others are taking longer to connect their populations because they are building a 21st century infrastructure, not a 20th century one.
Ofcom must try and enforce the new rules on budgets, customer prioritisation and confidentiality, etc. But I am not optimistic, partly because the break-up threat now appears empty. Also, their imposed structure contains a fundamental dichotomy; it is asking a company to put its customers interests ahead of what it has already clearly demonstrated it believes are the best interests of its shareholders. Those new Articles of Association will truly have to be a world’s first to make that work.
The regime at BT would rather spend £1 billion+ on football as the opium to keep the masses happy with slow broadband and the world’s worst customer service, than invest properly in the country’s fundamental infrastructure, in which context they constantly try to spin £6 billion as a serious amount of money.