Openreach: An open and shut case

Frustrated by the ‘don’t worry we know best’ negotiating stance of the UK’s incumbent telco BT, regulator Ofcom has finally made the first move to legally split the broadband provider from the rest of the company – specifically notification of the European Commission of the beginning of the separation process.

Of course, this in itself is part of the negotiation. If BT believes in this shot across its bows it may make enough movement towards Ofcom’s demands that the enforced split will be called off. But there isn’t much sign of that. BT yesterday appointed Mike McTighe – a telecoms insider’s insider – as chair of Openreach, and actually said out loud it thought this and some more tinkering with his reporting line would sort everything out.

The truth is BT is understandably preoccupied with sorting out its EE acquisition and re-entry to the mobile market that it never should have left. It has portrayed the Openreach row as a brouhaha in a beverage container stirred up by its broadband rivals Sky and TalkTalk. The disingenuousness of its arrogant claims to be steering a Europe-beating digital economy with industry-leading high-speed access is breathtaking. Because it has opted for the fastest spread of not very fast access it has ended up with a so-called high-speed offering that it is reluctant to supply if your ADSL can manage an unimpressive 17Mbs, because it can’t guarantee the speed will be any higher – the very quickest it can promise is up to 52Mbs. And even with this approach there are many remaining black spots and its customer service is very challenged, to put it politely.

The current structure works for BT but no one else; not its rivals, not customers and not the UK. Its ‘try it if you dare’ attitude to break up is not based on massive self-confidence in its own approach but on the prosaic fact that the Group’s pension liability is large and will be hellish difficult to re-allocate. It has so far relied on this fact as a breakwater to regulator imposition. If the regulator is now prepared to insist on at least a separate legal framework, notwithstanding those difficulties, then there will come a tipping point when BT will decide that if it can’t retain the advantages of Openreach remaining firmly in the group – as proudly proclaimed on the side of every BT vehicle – it will spin it off itself. Which will make the regulator and its rivals’ point for them.






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