Should BT still own Openreach?

separation

Ofcom is conducting a review as to what the ongoing relationship between BT and Openreach should be in the future. They are considering 4 options:

  • Maintain the status quo
  • More deregulation
  • The “structural separation” of Openreach and BT – in particular whether Openreach could be spun out more fully from BT
  • Adjusting the existing system to make it “more fit for purpose”. That could include improving services, repairs, and laying new superfast lines

The head of Ofcom, Sharon White, has said that retaining the status quo is unlikely but she is facing strong opposition. BT’s boss Gavin Patterson having first called it a mistake has since threatened to take legal action if Ofcom decides to split Openreach from the telecoms giant. And the digital minister Ed Vaizey has already indicated that the government is sceptical about such radical action.

Our view is that only the structural separation can help the end customer benefit. Interesting to note that Gavin Patterson does not make any mention of the quality of service their customers experience on a daily basis. Almost one in four repairs take longer than the laid-down targets and 10 per cent of all new installations are not completed to the original committed date. It becomes even more interesting today, with the announcement that Openreach’s CEO has resigned. Joe Garner is off to the same role at the Nationwide Building Society.

Many targets are set so low that achieving them is no great shakes. There is no financial penalty for missing them. Even based on new targets – signed off in June – it will be acceptable for one in five faults to take more than two days to fix and one in five installations to take more than two and a half weeks.

The other providers have long felt that they are disadvantaged by Openreach sitting within BT and want Ofcom to go further. They complain about the time taken to connect services and roll out new broadband access – something about which many local rural areas regularly complain.

As a end customer you cannot talk directly to Openreach if there is a problem. You have to speak to the company that you ordered the services through and they in turn talk to Openreach. The only thing you can complain directly about is if their engineers make a mess of your carpet. If you want any financial compensation you have to claim through your supplier who in turn makes a claim against Openreach.

A separate company would be much more accountable for performance particularly if operated under licence. They would know non-performance could lead to loss of its licence. If BT are to retain ownership then they need to radically overhaul their approach to customers and accept financial penalties for missed or cancelled appointments or failing to fix faults in time. Only in that way will things improve.

If you are in any doubts one final example as to why it is necessary BT tried to charge Openreach part of the cost of acquiring EE. It was only £1.7m out of £12.5bn but had it gone through then effectively BT’s competitors would having been helping to fund the acquisition through the charges BT Openreach makes them. Fortunately Ofcom has blocked it.