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BT warns it will cut Openreach investment if split goes ahead

In its submission to Ofcom’s Digital Communications Review, BT argues for Openreach to remain part of the BT Group and warns that a split will damage broadband investment

BT has delivered its response to Ofcom’s Digital Communications Review, which closed to submissions on 8 October.

The company warned that the UK’s digital and economic health depended on Openreach remaining part of the wider BT group and that Ofcom was not paying enough attention to Sky’s dominance of the pay TV market.

In a statement setting out its final position, BT reiterated previous threats that an Openreach split would damage investment in UK broadband networks.

It said that further large-scale investment was central to its vision for the next decade – building on the £20bn it has spent since 2005 – as well as an enhanced focus on service to meet massively increasing consumer demand for connectivity.

“It is vital for the digital health of the UK that Openreach remains part of the wider BT Group as this will enable it to continue to benefit from BT’s capital, as well as the circa £500m a year BT spends on research and development.

“BT is keen that Openreach continues to provide regulated services to all companies on an equal basis, as this model has served the UK exceptionally well over the past decade. The company believes others have failed to make a convincing and evidence-based case for change,” it concluded.

It cited recent Analysys Mason figures that show the UK currently leads the big five EU economies for superfast coverage, take-up and competition and said prices were among the lowest in Europe.

The submission also argued that the increase in average UK broadband speed since 2005 – from 1Mbps to 22Mbps – proved the current model was working.

“BT is driving the transformation of Britain’s digital infrastructure, but we need the right regulatory regime that supports fair competition for all and large-scale investment,” said BT CEO Gavin Patterson.

“With this in place, there is no doubt we can meet the challenges of the next decade, fulfilling the needs of consumers and businesses, driving the growth of the UK economy and supporting social progress for the whole country.”

BT’s submission came shortly after it emerged that mobile network operator Vodafone had also nailed its colours to the mast, saying that full separation of BT and Openreach would give all operators fair access to the markets.

However, BT has received support from other quarters, notably the Country Land and Business Association (CLA), which said that although the rural broadband roll-out had been badly handled, it was more important that it was allowed to continue at pace, which would not happen if Openreach was suddenly embroiled in a legal battle over its future.

Pay TV poorly regulated

BT tried to deflect some of the criticism it has received over the dominance of Openreach in the infrastructure market onto Sky, saying its dominance of the pay TV market was a “continuing problem” that was going “unchecked”.

It said Ofcom had run a lopsided regulatory regime by giving Sky easy and well-regulated access to the Openreach network for its broadband products, while BT struggled to get similar wholesale content deals with Sky.

“Ofcom has the opportunity to level the playing field by tackling Sky’s dominance of Pay TV. That dominance has led to poor outcomes for UK consumers and it is about time converged regulation was introduced to deal with a converged market. The current lop sided approach isn’t serving customers well,” said Patterson.

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