Main content

BT wins, UK loses as spineless 'regulator' Ofcom fails to force Openreach split

Stuart Lauchlan Profile picture for user slauchlan July 25, 2016
Ofcom's letting BT's toxic relationship with Openreach go largely unchanged. The losers - customers, BT rivals and the UK digital economy. Shame on Ofcom!

Platitudes from Patterson

They’ll be popping open the champagne up top the BT Tower this morning after regulator Ofcom failed to take the chance to break up the firm's toxic cartel with Openreach.

In so doing, Ofcom has let down BT customers, alternative broadband infrastructure providers and the UK digital economy.

While talking a good fight beforehand, Ofcom ultimately fell at the last fence and has this morning confirmed that it won't be forcing BT to spin off its Openreach arm as an independent company. Instead it  will pursue BT’s ‘compromise’ option of appointing an Openreach Board, staffed with 'independent' members, but chaired by an Openreach CEO who will still report to the BT CEO who controls the purse strings.

The very fact that this is the option that BT Chairman Mike Rake was pimping around the media yesterday should be warning enough that this is the wrong choice for Ofcom to have made and one that hands BT a barely-modified version of the status-quo that has been condemned by customers, rival service providers and legislators in the UK House of Commons just last week.

The rationale from Ofcom Chief Executive Sharon White is that a full separation of Openreach would take too long and be too complicated. Maybe so, but critics of BT’s effective private monopoly have been calling for such a split for years. This isn't a new issue. If Ofcom had bothered to take action before, the process might have been completed by now.

And since when was ‘difficult’ a reason for not doing the right thing? If that mindset prevails, Brexit talks are going to be interesting...

Oh and by the way, the really difficult bit appears to relate to the complexities of divvying up the BT and Openreach pension schemes!!!

BT wins, the UK loses

Still, BT is clearly over the moon, with Chief Executive Gavin Patterson once again trotting out the delusional mantra that somehow his company is actually helping the UK, the broadband industry and its own customers. He claims:

We have listened to Ofcom and industry and are introducing significant changes to meet their concerns. These changes will make Openreach more independent and transparent than it is today, something both Ofcom and industry have requested.

Openreach is committed to delivering better service, broader coverage and faster speeds and these changes will enable it to do just that. Our proposals can form the basis for a fair and sustainable regulatory settlement and we believe they can also enable Ofcom to bring its Review to a speedier conclusion.

He even has the brass neck to push out the utterly meaningless spin that:

The UK is the most digitally-advanced nation in the G20 and further investment is required if it is to keep and extend that lead.

Why he didn’t just say, ‘Phew, we got away with it’ and have done with it, I don’t know.

He certainly didn’t need to push the BT party line - the so-called regulator’s Chief Exec was doing that for him, with White pitching a line that could have been scripted for her by a BT press office intern:

This could bring about significant change. It will mean you have faster, more reliable broadband. It will mean engineers turning up on time and getting the job done first time. And crucially for the UK it will mean more investment in fast fibre to the doorstep.

Will it heck as like!

What it will mean is that BT has licence to continue abusing its private monopoly and chasing personally-advantageous commercial distractions, like spending millions on Premier League football rights, rather than focus on providing the UK digital economy with the kind of 21st century broadband infrastructure it desperately needs.

Meanwhile rival providers are left in thrall to a BT that has no incentive whatsoever to do anything other than mouth a few platitudes about wanting to level the playing field. TalkTalk Chief Executive Dido Harding can see through this flim-flam:

Legal separation still means a highly complex web of regulation, and BT has proven itself expert at gaming this system. There is nothing to suggest they will not continue to do so in the new system. Structural separation is cleaner, with less red tape. In taking one cautious step forward, I fear Ofcom may in practice have taken five steps back.

Last week MPs on the Culture, Media and Sports Committee of the House of Commons blasted BT for its lack of investment in the nation’s broadband infrastructure and called for a full separation to be considered. That was encouragingly robust.

But today, the Department for Culture, Media and Sport (DCMS) has lapsed back to its default ‘sitting on the fence’ position:

We are clear that a more independent Openreach is needed to benefit consumers and the UK’s digital infrastructure. We are concerned that BT’s proposals do not go far enough and think it is right that full structural separation remains an option. Swift and clear action is needed to give certainty to consumers, industry and investors in the UK’s broadband infrastructure, and which delivers rapid improvements in the level of investment and service.

Others are less than impressed with today’s outcome. Grant Shapps, a former Conservative Party chairman and a fierce critic of BT and Openreach, said:

Ofcom's continuing reluctance to act condemns hundreds of thousands of people to the slow lane of internet connections...By now Ofcom should appreciate that high speed broadband is the fourth utility which no modern household should be without.

You have to wonder how many times BT Openreach has to fail the public before the regulator acts. The idea of one more chance is being stretched to its limit while ordinary families and British businesses continue to suffer through poor or no super-fast broadband.

Tim Farron, leader of the Liberal Democrats, also said Ofcom had proved itself to be toothless:

[Openreach] provides a poor service to customers and has been starved of investment. Giving more powers and investment to Openreach is better than nothing but the crucial thing is it will leave millions of customers with poor quality broadband.

So will this new Openreach Board have strategic spending control to address the underinvestment charges laid at BT’s door? That's one of the most crucial points and inevitably it doesn’t look like it.

According to BT, the Board will have “a high level of autonomy” - how high? - but while it will control how capital is spent, it will have to operate within budget constraints set down and controlled by its BT masters.

So, if Openreach needs £100 million to meet its objectives, but BT only allocates £50 million, the only change now is that Openreach gets to decide how it spends that paltry sum. It doesn’t address the problem that BT has no incentive to increase its investment. Jeremy Darroch, Chief Executive of BT rival Sky, points out:

Leaving Openreach’s budget in the hands of BT Group raises significant questions as to whether this will really lead to the fibre investment Britain requires.

I can tell him the answer to that right now - no, no it won’t.

My take

There’s a wonderful idea that crops up in the UK political satire Yes Minister that whenever a new government minister comes into office, he or she wants to reform and change things for the better. What the civil service has to do is wait for them to “go native” and start to act as lobbyists and advocates for the status quo of the very industries and markets they intended to reform. It doesn't usually take too long before the Health Secretary is defending the tobacco industry etc.

matt hancock
Hancock - well may he look down

I was reminded of that today when reading the platitudes of Ofcom Chief Exec White.

Our new Minister for State for Digital Policy at the DCMS Matt Hancock should hang his head in shame as well. Less than a week in the job and he’s tweeting out a link to a statement of meaningless, mealy-mouthed platitudes. That’s going native in super-fast broadband time!

Nine out of ten homes and businesses now have access to super-fast broadband, says DCMS. Zero out of ten homes and businesses in my area of central Brighton have access to any form of broadband faster than 5mg - on a very, very good day. Openreach engineers tell residents that the local exchange is technically capable of offering Infinity, but that BT will never make it generally available as it can make more money selling hugely-expensive private fibre installations to hotels, casinos and other businesses.

Meanwhile, after six months of Kakfa-esque communication with Patterson’s own Executive Complaints team at BT, I won an accidental, on-record, admission that, yes, it is indeed a commercial, not technological, decision to digitally disenfranchise hundreds of people in a major city on the South Coast of England. Given that’s what happens in the urban centers, spare a thought for rural communities. I've referred my complaint to Ofcom. I didn't have particularly high hopes for a decent resolution before today; I certainly don't now.

BT really couldn’t have hoped for a better outcome, nor the UK digital economy for a worse one.

Ofcom has completely failed the nation today and, in my opinion, White and any of her colleagues involved in coming to this sorry set of conclusions, should consider their positions.

A spineless regulator is worse than no regulator at all. For shame, Ofcom, for shame.

A grey colored placeholder image