News
U.K. incumbent told to put its house in order or face full split from infrastructure arm.
U.K. MPs on Tuesday accused BT of underinvesting in its Openreach infrastructure arm and threatened a full separation of the two unless the telco puts its house in order.
A report published by the Culture, Media and Sport committee said BT’s current structure allows it to use the earnings generated by Openreach to subsidise investments in other parts of its business, such as BT Sport, rather than investing it back into improving Openreach’s access infrastructure or customer service.
The report claims that capital spending at Openreach has been broadly flat between 2009 and this year.
"The shortfall in investment in Openreach could potentially be hundreds of millions of pounds a year," the committee said. "It arises because BT appears to be deliberately investing in higher-risk, higher-return assets such as media properties, and not investing in lower-risk infrastructure and services through Openreach."
BT, understandably, feels the criticism is unfair.
"We are disappointed to be criticised for having invested more than £1bn a year in infrastructure when the U.K. was emerging from recession and rival companies invested little," said a BT spokesman, in a statement emailed to Total Telecom.
He insisted that BT is pumping more money into Openreach, pointing out that the company plans to spend £6 billion on fibre and 4G networks over the next three years, provided Openreach remains a part of BT.
Meanwhile, telco watchdog Ofcom came in for criticism from the committee as well.
The report said that Ofcom’s focus on wholesale price caps has been successful at keeping retail prices low, but noted that Ofcom only recently turned its attention to improving Openreach’s service quality.
"It is an open question how effective overall it has been in stimulating investment in Openreach’s infrastructure," the committee added.
"We agree that service levels have to improve and yesterday we announced that we are making significant progress in this area," said BT’s spokesman.
Indeed, Openreach said yesterday that it now fixes 84% of faults within two working days, up from 67% two years ago when it first started reporting its performance levels. According to Openreach, 93% of new lines are now installed on time, and it has reduced the average waiting time for an appointment to seven days from 11.
"We are hitting all of Ofcom’s service targets and are determined to exceed them given customer expectations are rising all the time. Thousands of engineers have been recruited and we are fixing repairs and installing new lines quicker than before," BT said.
Ofcom stopped short of forcing a full structural separation of BT and Openreach when it published the preliminary conclusions of its strategic review in February; however, it called for greater autonomy at Openreach and reserved the right to enforce a split should it deem such a move necessary.
The committee on Tuesday said it supported Ofcom’s position, adding that "if BT fails to offer the reforms and investment assurances necessary to satisfy our concerns, Ofcom should move to enforce full separation of Openreach."
"We are in discussions with Ofcom about increasing the autonomy of Openreach and are hopeful that a settlement is possible that will meet the concerns of the committee," said BT’s spokesman, who warned that "separating Openreach from BT would lead to less investment, not more," and would "fatally undermine" the committee’s aims.
