BT in talks with Ofcom over Openreach “autonomy”
Control of broadband infrastructure subsidiary being discussed with regulator as company rejects Commons committee criticisms of its investment in service delivery
BT has said it is in discussions with regulator Ofcom in looking at “increasing the autonomy” of its Openreach broadband infrastructure arm amidst threats from parliament’s Culture, Media and Sport Committee of a possible split of its operations without improvements in connectivity and investment.
In a report looking at UK connectivity, the committee has accused the company of "significantly under investing" in its infrastructure subsidiary, resulting in a potentially negative impact on internet access at a time where Whitehall is looking to drive efficiency with more online public service uptake.
In a statement issued today, the company said it hoped to reach a settlement that would address the committee’s concerns about Openreach, which owns the pipes and cables connecting organisations and properties to the UK’s national broadband and phone network. However, BT was critical of calls to separate management of Openreach.
“Separating Openreach from BT would lead to less investment, not more, and would fatally undermine the aims of the committee,” claimed the company in a statement.
BT also expressed disappointment at being criticised in the report over investment, arguing that it has spent £1bn a year in infrastructure, a commitment not undertaken by other private sector operators following the recession.
“Openreach investment is 30% higher than it was two years ago and it will grow again this year. We are already pumping in hundreds of millions of pounds of extra money and we have also committed to invest a further £6bn over the next three years,” said a spokesperson for the group.
“We agree that service levels have to improve and yesterday we announced that we are making significant progress in this area. We are hitting all of Ofcom’s service targets and are determined to exceed them given customer expectations are rising all the time. Thousands of engineers have been recruited and we are fixing repairs and installing new lines quicker than before.”
In the committee’s findings, based around the views of independent experts, BT was accused of exploiting its market position by favouring corporate interests over shareholder value and customer benefit.
Despite praising Openreach in working with local and central government for meeting a 90% coverage target for superfast broadband, the committee’s report said that a patchwork of areas remained where residents faced being excluded from accessing workable internet and online services.
The company now faces calls within the report to “significantly” step up investment in Openreach and provide the subsidiary more control over spending.
“If BT fails to ‘offer the reforms and investment assurances necessary to satisfy our concerns’, Ofcom should move to enforce full separation of Openreach’,” the report noted
The findings also argued that as a regulator, Ofcom did not put enough emphasis on improving Openreach service quality, with an overhaul of existing penalties recommended to try and ensure more money is put into infrastructure.
Citing evidence used to formulate the report, the committee said that it anticipated a decision to separate Openreach’s operations from BT would lead to improved funding of broadband infrastructure as a result of not having to compete with other private sector operators.
“By adopting its current approach, BT is likely to be sacrificing shareholder value and public benefits that would flow from these investments,” said the findings. “This is likely to mean that substantial amounts of money—potentially totalling hundreds of millions of pounds a year—are not being invested in developing and upgrading Openreach infrastructure which is critical to the UK economy and most people’s lives.”
According to the report, the government’s Broadband Delivery UK (BDUK) programme was nonetheless expected to meet it aims of ensuring 95% of premises in the country can access superfast broadband by the end of next year.
Yet concerns were raised around whether adequate investment was being made in critical infrastructure.
“The UK is a laggard by international standards in providing fibre connectivity. This could result in a widening, not a narrowing, of the digital divide; especially as demand for faster services escalates after 2020. UK broadband access infrastructure is dominated by BT’s local access network subsidiary, Openreach,” said the report.
“Openreach, local bodies and BDUK are to be congratulated for hitting their 90% coverage target for superfast broadband. But one consequence of this rapid rollout has been that the programme appears to have tackled the easier-to-reach premises within the interventions areas first and has not delivered coverage to whole areas.”
The findings also considered a pledge by former prime minister David Cameron late last year to introduce a Universal Service Obligation (USO) that would allow individuals the right to request an affordable connection at a minimum speed from a designated provider within a cost threshold.
The committee argued that a key justification for such a USO being introduced would be possible social and economic benefits that may be realised in areas such as online government service delivery.
“For example, by 2020 digital services such as ‘tele-medicine’ are likely to be more prevalent—where patients monitor their own conditions through home-based or wearable devices connected to the internet, which could reduce the need for referrals to acute centres,” said the report.
"Clearly, broadband offers an opportunity to overcome geographical constraints by providing more services remotely. On the other hand, inadequate provision is a significant drag on the economy, inhibiting employment creation, limiting educational opportunities and reducing the quality of life for households in affected areas."
Earlier this month, the Digital Economy Bill was submitted to parliament for scrutiny with a provision for ensuring a right to fast broadband and automatic compensation in cases where consumers are judged to not have been provided with adequate service from telecoms providers.