BT not spending enough on last-mile wholesale network, say UK MPs

19 July 2016 | Alan Burkitt-Gray


BT is spending money earned from Openreach on group priorities, not on improving access infrastructure, says MPs’ committee.

A committee of UK politicians has called for Openreach – the BT division that runs an equal-access last-mile wholesale network – to be allowed to raise its own finance in the capital markets, if it remains part of BT.

They question BT’s investment decisions, saying that “BT Group is exploiting the position of vertical integration to make strategic decisions that favour the group’s priorities and interests, at the expense of its access infrastructure business.”

They imply that BT is using the security of “Openreach’s utility-type assets to cross-subsidise riskier activities elsewhere in the group”, and say Openreach “is significantly under-investing in the access infrastructure and services on which a large part of the public rely”.

The report, from the Culture, Media and Sport committee of the House of Commons, clearly indicates that its ideal would be for Openreach to be separated out into an independent wholesale operator, providing last-mile fibre and copper access to residential and commercial premises.

The UK regulator, Ofcom, has already said that it is considering full separation. “That option should be kept firmly on the table,” say the MPs. “Ofcom has said that the proposals BT has offered to date on governance, performance, status and other arrangements of Openreach have not gone far enough.”

They say that “Ofcom must remain resolute in its negotiations with BT, to ensure that the reform necessary to establish the quality and availability of communications services needed for UK consumers and businesses is delivered.”

They warn that even though “over £1.7 billion of public money is expected to be invested in closing the digital divide” and that 95% of premises should have access to superfast broadband by the end of next year, “there is a serious public concern that the UK is not adequately investing in critical telecoms infrastructure. The UK is a laggard by international standards in providing fibre connectivity,” they say.

“This could result in a widening, not a narrowing, of the digital divide; especially as demand for faster services escalates after 2020.”

The current policy “has left a patchwork of premises that have not been reached, and created much uncertainty among local residents as to whether or not they will be connected or receive improved speed”.

They warn of a “lack of transparency in Openreach’s costs and deployment plans, the apparent effect of which has been to stifle local competition and thwart other network providers’ planning. At the same time, Openreach’s historically poor service record has failed to improve in the face of escalating demands on the network.”

The current aim is for a universal service obligation (USO) of 10Mbps. But the MPs warn that “the need for an increase in the USO minimum download speed to 30Mbps by 2022 is entirely foreseeable, and the Government will need to make active plans for this eventuality”.