Renewed calls for Openreach to be split into its own legal entity
When the BT Group CEO talks about investment and regulatory certainty being a pre-requisite of any investment plans this is usually a tacit reference to the recent Ofcom Strategic Review of Digital Communications. Ofcom in February largely chose the muddled route with stricter performance targets and an PIA Mark 2 product to keep competitors to Openreach and its large non-BT customers happy, but the publication of a 10 point plan by Sky, TalkTalk, Vodafone, INCA and the Federation of Communications Services suggests that many were not happy with the Ofcom decision.
"Our 10 Point Plan draws from a number of tried and tested approaches. It reflects best practice as outlined in the UK Corporate Governance Code. Several proposals are modelled on the proven independence arrangements which exist in other UK sectors including energy, media, rail, civil aviation and water markets. And we draw on the experience of other progressive countries such as New Zealand and Singapore, which demonstrate that reforms of this kind this can be achieved without prohibitive cost.
Nothing worth having can be achieved without some effort. However, corporate restructuring of this kind happens every day amongst large companies as they seek to better serve their customers. The creation of independent subsidiaries is commonplace, straightforward and can be achieved in a reasonable timeframe. These industry proposals can be implemented swiftly and will in our view deliver a step-change in the effectiveness of Openreach.Extract from Industry Proposal
The ten points suggested to make this consortium of unhappy providers happy are:
- Openreach is established as a legally separate company
- Openreach has its own independent Board
- An independent body to oversee transition and act as an adjudicator
- Openreach owns and controls its assets
- Openreach has its own distinctive and independent branding
- Openreach is financially independent, with autonomy over its budget
- Openreach provides its services and information on an equal basis
- Openreach properly consults with all its customers on strategy, capital expenditure and product design
- Openreach is no longer the only provider BT can use
- Openreach does not inhibit investment by independent network operators
One of the complaints apparently made to some of the UK press over the weekend was that the recent change to Infinity 1 based around a 55/10 VDSL2 variant was not announced to providers before the launch by BT Retail, but this seems odd given that discussion and speculation was rife on various online forums as to who was going to use the new Openreach product which was formally announced in December 2015.
The Point 10 on overbuild is interesting, as it suggests rather than the pure commercial model a set of limited franchises could result, though if this is pure rural FTTP we are talking about then Openreach may prefer to forego those areas leaving existing exchange based services in place until the end of their life and in return seek a downgrade of a its existing phone USO and that the proposed broadband USO be shared with the smaller operators too.
We believe using Singapore as an example is very poor, it is an island of some 5.4 million people with a population density of over 7,000 people per sq km, higher than London at 5,000 people per sq km. Comparison with Singapore is fair is this ten point plan is aimed at getting FTTP to the urban parts of the UK, at which point it is less about breaking up BT and more about how new TV operators can compete with the established presence of Virgin Media. New Zealand may represent a better fit, but it is not hard when searching around to find moans and groans about poor service delivery and long wait times for the roll-out there, so maybe not the nirvana portrayed.