BT and OfCom reach a deal. Will it work for Britain?

BT's Openreach broadband arm will become a ‘legally separate entity’ within the group in the hope that this will improve service. But BT still calls the shots

James Moore
Chief Business Commentator
Friday 10 March 2017 12:59
Ofcom chief Sharon White says this is a "significant day" for broadband users
Ofcom chief Sharon White says this is a "significant day" for broadband users

Hurrah! Peace finally reigns over broadband Britain. At least when it comes to BT and Ofcom.

The telecom giant has finally caved in and agreed to the legal separation of its Openreach broadband infrastructure arm within the group.

That means no more BT branding on Openreach vans. And the 32,000 people who work for the company will get a new boss. Sort of.

The regulator hopes the new set up will lead to faster broadband speeds, more investment in the Openreach network, better service for BT’s rivals and their customers, a better digital deal for UK plc.

But, and it’s a big but, while Openreach will be a legally separate entity within the BT Group, it will still be under the latter’s 100 per cent ownership. While Openreach will control its budget, BT sets it.

Openreach will have its own board. BT appoints the board.

The chief executive of Openreach will report to Openreach’s chairman. But there will be “accountability to the BT group chief executive with regards to certain legal and fiduciary duties that are consistent with BT’s responsibilities as a listed company”.

If all that gives you a headache, and makes you wonder if this will actually change anything beyond creating a bit of work for people in taking the BT logo off Openreach vans, well, you're not alone.

What the deal represents is a compromise, and compromises are messy.

Ofcom boss Sharon White has repeatedly said the regulator has taken this road because it felt it could achieve its aims more quickly, and without the need for an expensive, messy and time-consuming battle that would follow a demand for a break-up.

The UK economy could suffer greatly through that. Its digital infrastructure was compared unfavourably with that of, erm, Peru in a recent report. It might slip further were that to happen.

If the country is to have any hope of a prosperous future following the self immolation of Brexit, of narrowing a yawning trade deficit that stayed flat at £2bn in January despite the weak pound, it cant afford to hang around when it comes to matters digital.

But despite the potential disruptions, BT’s rivals, which have long groused about what they see as shoddy Openreach service, still wanted to see the latter spun off and they made a compelling case.

They rely on its network to provide broadband to their customers, and they are now supposed to be consulted more widely about its investment plans. But anyone who has followed Government consultations will know that the right to consultation doesn't always get you very far.

That isn't the only flaw with the new Openreach arrangement. As one commentator pointed out this morning, there is no mention of penalties if Openreach misses targets. With BT spending more than £1bn on sports rights, it's fair to ask whether it's doing all it should when it comes to investing in Openreach.

You would hope that BT will wake up, and realise that if it doesn’t make this work, if broadband speeds in Britain don’t improve quickly, and the country doesn’t start moving up those league tables I mentioned, it will lose Openreach, and, remember, Openreach remains a profitable part of its arsenal.

OfCom’s approach is perhaps the least worst option when it comes to fixing a difficult problem.

However, the watchdog needs to be willing to ride the newly “independent” company and its parent hard to ensure this new deal delivers. There is an awful lot riding on this compromise and not just for BT, Openreach, its unhappy customers, and Ofcom. This affects all of us.

Join our new commenting forum

Join thought-provoking conversations, follow other Independent readers and see their replies

View comments