BT one, UK nil - Ofcom's betrayal of the digital economy with Openreach fudge

Stuart Lauchlan Profile picture for user slauchlan March 12, 2017
Ofcom's fudge of a deal with BT over Openreach has BT exactly where it wants to be. This is not the deal that a Brexit-facing Britain needed to have delivered.

BT tower
You must be pleased, said one of my friends over the weekend, now that Ofcom has beaten down BT?

To which the only response is, er, no it hasn’t. In fact, there’s a strong case to argue that Ofcom has BT exactly where BT wants to be.

What’s happening is that Openreach, which owns Britain's broadband and fixed-line telecoms network, will now be legally separated from BT.

But it and its assets will continue to be owned by BT, albeit run at arm’s length, whatever that means in practice.

Openreach will be able to spend its own budget as it chooses, but that budget will be controlled and allocated by BT.

BT can also veto the appointment of executives heading up Openreach. Patterson told CityAM newspaper that being able to hire and fire the Openreach board was a red line for BT.

All of that falls pretty far short of a BT that’s been beaten back by Ofcom.

Investors were happy. The share price rose, presumably a result of the perception that this ‘bugger’s muddle’ of a regulatory fudge means that BT is off the hook. A full-scale break-up of the toxic symbiosis between the telco and Openreach would have been complicated and highly-disruptive, the propaganda party-line pimped by BT.

It would also ultimately have been in the best interests of the UK’s digital economy and the future of broadband rollout, but hey, what does that matter?

What’s really happened here is that Ofcom has blinked and taken the path of least resistance. BT would have tied it up with judicial reviews if a decision to go for full break-up had been taken. BT CEO Gavin Patterson had already sneered that until the UK leaves the European Union, the company could look to Brussels to prevent the national regulator from taking action. He and his management team would undoubtedly have kicked and screamed as hard and as loud as they could to protect the status quo.

So Ofcom has gone for the ‘best of a bad lot’ option and is bigging up the crumbs that have fallen from the BT table as a major boost for UK broadband rollout. It’s nothing of the kind of course. The UK currently has 2% full-fibre coverage compared to Spain with 79%. Those are Ofcom’s own numbers.

If anyone really believes that this new ‘deal’ is going to do much to change that over the next few, critical, post-Brexit years, then I’ve got a bridge over the Hudson for sale that I’d like to talk to you about.

BT has only committed to “tweak” its planned £2.5 billion investment in upgrading Britain’s broadband network as a result of the new deal. Let that one sink in - there is ZERO new money committed to the broadband network as a result of this deal with Ofcom and no sign of any new plan to extend fibre services directly to homes around the UK.

Meanwhile BT’s other big move last week was to blow £1.2 billion on the rights to stream football to those households that are able to summon up enough bandwidth to be able to watch it!

So what will change? Well, BT will have to paint out its logo on the Openreach vans. And, er…well, that’s about it.


Still, Ofcom chief executive Sharon White boasted:

This is a significant day for phone and broadband users. The new Openreach will be built to serve all its customers equally, working truly independently and taking investment decisions on behalf of the whole industry – not just BT. We will carefully monitor how the new Openreach performs, while continuing our work to improve the quality of service offered by all telecoms companies.

I have in my hand a piece of paper, peace in our time etc etc etc.

Other broadband providers certainly weren’t jumping for joy. A spokesman for SKY said it was “a step towards delivering better service”, but added the caveat:

It’s important today’s agreement is implemented by BT in good faith and without delay.

Tom Mockridge, chief executive of Virgin Media, dismissed the new arrangement as:

Openreach is just the same old snail’s paced network with a new shell.

Meanwhile Dido Harding, CEO of TalkTalk, said:

This deal will require robust Ofcom monitoring and enforcement to ensure it delivers the improvements the regulator expects. We hope this is the start of a new deal for Britain’s broadband customers, who will be keen to see a clear timetable from Openreach setting out when their services will improve.

For his part, BT’s Patterson said:

We have listened to criticism … and as a result are willing to make fundamental changes to the way Openreach will work in the future.

Damned gracious of you, Gavin - thanks.

My take

Look, it’s very simple - Patterson and his team stood their ground, issued some threats about Brussels, flagged up logistical crises about pensions, which the taxpayer would be left liable for to a degree - and Ofcom spinelessly caved in with a fudge of a deal that allowed it make some ‘look how tough we are’ noises without actually having done its duty to the UK digital economy.

A Brexit-focused government can do without the added complications of BT dragging this in front of Eurocrats unlikely to be in particularly favourable mood, so the timing is perfect.

Meanwhile my network connection at home celebrated this brave new broadband world by sinking to 1.5Mb download this weekend. That’s below the guaranteed minimum requirement for BT service delivery. Once I pointed this out to BT customer services, they leapt into action and promised that they’d get their best engineers on the case in order to give the broadband service they had promised.

Actually, no they didn’t, of course they didn't. They parroted the usual ‘get rid of the annoying customer’ party line and said that it was all down to Openreach and there was nothing they could do about it. When asked about what they were going to do about breaking their own guaranteed speed promise, they told me that it was all down to Openreach and there was nothing they could do about it. And rinse and repeat.

Nothing that happened last week is going to get that cheat sheet script re-written in BT’s call centers. Ofcom should enjoy its little flurry of positive headlines last week. The reality will soon sink in. The regulator may have been caught between a rock and a hard place, but until it grows a spine, nothing is going to change and the UK’s digital competitiveness is going to be at the mercy of a privatised monopoly that prefers to spend billions on football than on servicing its customers. For shame, Ofcom, for shame.

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