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Vodafone tells Ofcom: Time to break up BT

Mobile network operator Vodafone lends its voice to the growing clamour arguing for full structural and functional separation of Openreach from BT

As the clock runs out on Ofcom’s Strategic Review of Digital Communications, Vodafone has become the latest communications provider to weigh in on whether or not BT and Openreach should be split apart.

Vodafone head of regulatory affairs Matthew Braovac told the Financial Times he wanted to see a separate Openreach and full separation would give the UK’s communications providers fairer wholesale access to the national network.

It is understood that, in Vodafone’s submission to Ofcom’s consultation, the mobile network operator (MNO) argued that BT generated over £6bn excessive profits from Openreach since 2005 – something Vodafone sees as handing the organisation an unfair advantage.

Ofcom’s consultation closes on 8 October 2015, and seeks input on a number of regulatory issues affecting the UK communications sector – prominent among which is the status of Openreach as a BT-controlled business, which the regulator has put on the table.

The decisions Ofcom takes following the consultation will set the stage for the regulatory environment over the next 10 years.

Vodafone has now aligned itself with a number of other providers, notably Sky and TalkTalk – and public figures such as Labour MP Chris Bryant, who argue that full separation is the only way to go.

However in recent weeks BT has come out fighting, taking a stronger position on its ownership of Openreach. In September 2015 BT pledged to increase the universal service commitment to offer 5-10Mbps broadband to 100% of UK homes and business, to extend its FTTC roll-out, and to offer ultrafast broadband over copper to 10 million properties by 2020, using technology.

R&D hostage to fortune

It warned that to separate Openreach would put investment in UK broadband at risk, as it would be harder for Openreach to access the wider resources and expertise BT holds – a reference to its R&D facility at Adastral Park in Suffolk, which is currently working on, among other technologies.

“BT is trying to create the idea that an Openreach owned by BT is the only way to guarantee investment – and that is simply not true,” said Charles Bligh, managing director of TalkTalk Business, speaking to Computer Weekly in September 2015.

“I think a separate Openreach wouldn’t be constrained by BT in the near and medium term. It would invest in the long-term future.”

Market commentator Paolo Pescatore of CCS Insight said that to separate Openreach would be a big call for the regulator and the competition authorities to make – carrying a lot of risk – and would take a long time to implement.

Pescatore sided with BT, which has argued that the review is fixated on its relationship with Openreach and how that affects competition – while Sky is allowed to dominate the pay TV market.

“Calls for Openreach separation have overshadowed the wider review of the digital communications market,” said Pescatore.

“Ofcom needs to take into account the growing presence of OTT players and pay TV, which have not been subject to the same review as fixed-line broadband. For now it seems there is more than adequate competition in retail fixed-line broadband, but less in pay TV.

“For now it seems that the likely outcome is to retain the current functional separation with additional remedies and stipulations.”

The Country Land and Business Association (CLA) warned that Ofcom would be making a serious mistake if it forced a split between BT and Openreach.

The organisation said it would be a distraction and would divert attention and resources away from much-needed rural broadband programmes.

“There are big frustrations and shortcomings in Openreach’s performance to date and we expect government to be more demanding. However we want BT to be focused on delivering more connections at a faster pace, not distracted fighting legal battles over whether their company should or should not be legally broken up," said CLA president Henry Robinson.

“Rural businesses do not care how they get fast reliable broadband; they just need it as soon as possible. Every day that passes without broadband is another day of being held back from achieving their potential,” he added.

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