BT avoids Openreach breakup but Ofcom orders more investment
I feel this monopoly position has at least something to answer in terms of the challenges facing less connected rural communities in terms of broadband. This story tells us: BT will not have to sell off its Openreach broadband division despite concerns that it has been starved of investment and provides a poor quality of service to millions of homes.
The telecoms regulator, Ofcom, has instead ordered BT to give more independence and investment powers to Openreach, which owns the fibre and copper wires that run from the local telephone exchange to homes and businesses.
Ofcom said Openreach should be run as a legally separate company within BT Group, with its own board, an independent chairman and its own brand. The regulator’s chief executive, Sharon White, said the alternative choice of forcing BT to sell the division – as demanded by its rivals – would take too long.
“This is a practical plan that can be implemented within months, unlike a sell-off of Openreach, which would take years,” White said, pointing to issues such as land contracts and pensions. “This model should deliver … without years and years of legal wrangling. This is a structural change in incentives.” She said the UK was lagging far behind other countries, with only 2% of the country receiving ultrafast broadband delivered via fibre-optic lines, similar to Germany. Korea, Spain, Lithuania and Portugal are at around 60%, and Japan at 70%.
Steve Unger, Ofcom’s director of strategy, said a full-blown separation would trigger “very significant costs” related to BT’s £7bn pension deficit pension, to make arrangements for employees within Openreach. White added that making Openreach a legally separate company within BT would require it to act in the best interests of all broadband customers in the UK and not just BT customers. “Openreach has not done a good enough job on customer service.”