Saturday 11 March 2017

BT Openreach Deal Aims To Shakeup UK Broadband


BT has reached a deal with the industry regulator to separate its broadband network, Openreach, from the rest of the company. But will it make a difference to consumers? Openreach has long been dogged by accusations of poor customer service, long delays for connections and repairs, and households and businesses in despair over broadband speeds.

What has BT agreed to do?

Openreach, owned by BT, is a crucial part of Britain’s infrastructure, responsible for bringing landlines and broadband to most homes and companies in the country, not just for BT but also for rivals such as Sky. In a deal with regulator Ofcom, BT will now hive the company off independently, although it will remain the 100% owner. The idea is that Openreach will become a distinct entity with its 32,000 staff serving all customers equally, with the likes of Sky, TalkTalk and Vodafone treated no differently to BT when it comes to investment and access.

Will we now have faster broadband?

Don’t bank on it. Little more than 2% of the country receives ultrafast broadband delivered via fibre-optic lines, compared with 70% in Japan. We’re even behind Turkey and Mexico. Ofcom says “Openreach will develop its own strategy and annual operating plans” but adds the rider that it will be “within an overall budget set by BT Group”.

BT promised £6bn last year to bring “ultra fast” broadband to 10m homes and businesses. But dig into that figure and it looks more like £1.33bn a year – hardly enough, critics say, to bring the country up to speed. Rivals say BT has consistently under-invested, but an independent Openreach should at least allow BT’s rivals to more easily invest in their own fibre networks by accessing the group’s underground cables and telegraph poles.

Will I have to pay more?

The bad news is that Sky and BT have already announced higher prices this year for their phone, TV and broadband packages with some going up 10%. Landline rental – which most households need in order to access broadband – has gone up sharply by between 28% and 41% in recent years, even though the wholesale cost of providing those landlines has fallen by 25%. BT itself managed three price rises in the space of just 18 months. The suspicion is that consumers are subsidising fatcat Premier League wages as the telecom companies seek to recoup the massive outlay they have paid to acquire television rights – with this week’s £1.2bn renewal of Champions League rights the latest major investment. One hope is that smaller operators piggy-backing on a more independent Openreach, which will lease access to the broadband network, may be able to offer cheaper deals. Ofcom also recently ordered BT to cut bills for landline-only customers by £5 a month.

Will customer service improve?

Fingers crossed. Ofcom says the new Openreach will now serve all its customers equally, not just BT’s. Vodafone, Sky and TalkTalk, all of whom use the network to deliver services, have given approving nods to the deal. But consumer groups say there need to be tougher penalties for when Openreach gets it wrong, better quality of service requirements, and automatic compensation when providers fail to deliver.

Will BT’s £1.2bn Champions League deal be affected?

The company can’t pass the cost on to Openreach. And if independence fosters better competition and lower prices across the industry, BT’s ability to bid colossal sums for future football rights must be in doubt.

Why don’t they just completely separate it?

This is a saga that has gone on for years. One problem is BT’s pension scheme, which suffers from a mammoth deficit, and a forced separation would likely have provoked lengthy legal battles. BT’s share price was the fastest riser in the FTSE 100 after the deal was announced, which may suggest that shareholders will win most from this deal rather than householders.



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