The Openreach Decision
Today, February 25th, Ofcom made the announcement that they would not be splitting BT Openreach away from BT despite finding that “Openreach still has an incentive to make decisions in the interests of BT, rather than BT’s competitors, which can lead to competition problems”. Their solution to change the Governance model so that Openreach serves all wholesale customers equally and consults them all over investment decisions. A step in the right direction but Ofcom should have gone much further.
This will now await more detailed proposals later this year and they have not ruled out complete separation. We can expect BT to fight this all the way and try to water down proposals. Afterall BT has thrown the kitchen sink at stopping the break up. In the early days after the announced review, BT’s MD Gavin Patterson having first called it a mistake then threatened to take legal action. BT then launched large scale advertising campaigns promoting Openreach and finally offered to increase investment in the broadband network but only if the break up didn’t happen.
This type of separation has already happened, with great success, in countries such as New Zealand and Singapore. Botswana which is currently privatising its equivalent of BT decided to keep the network infrastructure with a separate company.
Consumer – not business – focus
BT may claim that superfast fibre broadband is available to 90% of the country but try telling that to businesses in central London. We recently helped a client moving to Oxford Circus. Instead of being able to spend £500 a year to get fibre broadband which their media business needed they were faced with paying almost £4,000 a year to get a dedicated connection. The EEF, the manufacturers association, in a recent survey said their small business members were paying an average of £5,000 a year to get decent broadband. All because Openreach has decided to prioritise the roll out to residential areas to support it’s investment in BT Sport.
Also as anyone who has sat waiting for an Openreach engineer to turn up to install a phone line knows problems occur on a daily basis. They do not appear to have addressed the issue whereby as an end customer you cannot talk directly to Openreach. You have to go via the company you ordered services through. The only thing you can complain directly about today is if their engineers make a mess of your carpet. We know of a business that has been waiting two months for a phone line and broadband to be install at new offices and there is still no final date despite the matter being raised directly to BT’s MD.
Other decisions are steps in the right direction however.
The opening up of BT’s network so that other providers can use their poles and underground ducts to run their services should speed up the rollout of faster services although it could increase the problems of number portability.
The introduction of automatic fines is something we have advocated for a long time. The current targets allow for 1 in 5 faults to take more than two days to fix and one in five installations to take more than two and a half weeks. Ofcom have yet to say what the new targets and how the high the fines will be. They cannot be token slaps on the wrist.
The league tables of suppliers will also help businesses and customers make more informed decisions.
Golden Opportunity Missed?
But overall I think this is a golden opportunity missed to take a radical step to improve a key infrastructure and the services around it for businesses and consumers alike. I hope that in the subsequent review on the exact future structure Ofcom realises it and pushes ahead with a full separation.
A separate company operating on a licence like the train operators would be more accountable. It would know that non performance could lead to loss of its licence.
The full text of Ofcom’s announcement can be found here http://media.ofcom.org.uk/news/2016/digital-comms-review-feb16/