If the separation of Openreach is the answer, what was the question?

BT has threatened to to go to law and delay or reduce its infrastructure investment programme if Ofcom attempts to break it up. In an otherwise excellent debate on the call for a Broadband Not Spot summit earlier this week, Most MPs failed to spot that we have to stop relying on investment by BT if we want the UK to have a world class broadband infrastructure by the end of this parliament. Over 40 MPs contributed responded to Matt Warman’s motion for debate and made many excellent points – including how alternative suppliers had supplied faster services  (100 mbps) at a fraction of the cost ( £ 3000 as opposed to over £ 100,000) to businesses left out of BT’s plans as “uneconomic”. Chi Onwurah and Stephen Timms also had fun attacking the Conservative government for re-creating a BT Monopoly.

As the MPs pointed out, with many trenchant examples from their own constituencies, broadband is the fourth utility, without which modern life grind would grind to a halt and local businesses cease to be competitive.

But BT cannot afford the investment needed as the same time as building a TV business and buying EE, without massive state aid. Meanwhile BT’s competitors need a level playing field, with political and regulatory stability, if they are to encourage fund managers to invest in future proof, fibre communications in the UK – as opposed to funding the plans of our overseas competitors.As I pointed out in my blog on the impact of Ofcom’s past decisions on investment decisions , the Labour Party switch to local loop unbundling allowed the US-owned Cable Companies to escape from Chapter 11 caused BT’s share price to collapse. In order to survive BT has to cut its investment programme from £4-5 billion per annum through £2-3 billion to barely £1.25 billion p.a.. It is difficult to do like for like calculations (allowing for management and other overheads and different access and wayleave arrangements) but it is probable that BT now accounts for less than 20% of the UK capital spend on fixed and mobile broadband. The other 80% is spread over about 60 suppliers, most investing in current world class full-fibre and/or wireless technologies with expected life spans of up to 40 years – while almost nowhere else in the world is deploying the FTTC technologies on which BT is relying. 

There are many good reasons for referring BT to the Monopolies and Mergers Commission but expecting a demerged Openreach to “make a difference” is not one of them. It controls neither the power supplies to the exchanges (said to be a major cause of current reliability problems) nor many of the choke points (single points of failure) in the BT wholesale networks where investment is most needed. 

P.S. I apologise to readers for the gap since my last blog. I have not been ill. Just busy. YOU may also be pleased to know that, given my current workload, these blogs are likely to be much shorter.