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BT should invest more in Openreach or be split up, say MPs

Tuesday, July 19th 2016 by Phil Wilkinson-Jones

BT has been “significantly underinvesting” in Openreach, a group of MPs has said.

In a damning report published today, the Culture, Media and Sport Committee said the shortfall in investment could be “hundreds of millions of pounds a year”.

The committee said BT has exploited its position – Openreach owns and maintains the UK’s largest broadband network – to make strategic decisions that favour its own interests.

MPs also criticised BT for not improving Openreach’s quality of service, adding that the prospect of harsher penalties should encourage the company to invest more in infrastructure.

The report says the shortfall in investment in Openreach arises because of BT’s preference for investing in “higher-risk, higher-return assets”.

BT completed the £12.5bn takeover of EE in February this year and has ploughed millions of pounds into securing Champions League and Premier League football rights.

The report concludes that, unless BT can “offer the reforms and investment assurances necessary to satisfy our concerns”, Openreach should be split from the BT group.

In Ofcom’s Strategic Review of Digital Communications, published earlier this year, the regulator stopped short of recommending a full split.

Instead it announced an overhaul of Openreach, forcing the company to open up its network so its rivals could build their own fibre infrastructure.

It also said there would be tougher requirements on Openreach to repair faults and install new lines quicker, as well as automatic compensation for consumers when things go wrong.

Openreach has since started trialling new processes that will make it easier for other providers to access and build on its network.

But today’s report puts fresh pressure on BT to up its game – and says “downward pressure” from Ofcom has failed to hold Openreach to an adequate level of service.

'Emerging from recession'

A BT spokesperson said: “We are disappointed to be criticised for having invested more than £1bn a year in infrastructure when the UK was emerging from recession and rival companies invested little.

“Openreach investment is 30% higher than it was two years ago and it will grow again this year.

“We are already pumping in hundreds of millions of pounds of extra money and we have also committed to invest a further £6bn over the next three years.”

BT said it agrees that service levels have to improve, adding that it is making “significant progress” in this area.

“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.

“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.

“Separating Openreach from BT would lead to less investment, not more, and would fatally undermine the aims of the committee.”

Dido Harding, CEO of TalkTalk, said: “This report puts beyond doubt the need for radical reform of Openreach.

“MPs have concluded that Openreach is not fit for purpose and is letting Britain down. As Ofcom considers how to improve Britain’s broadband, it should feel emboldened to know it has cross-party political support to be radical.

“BT’s broken promises risk creating a two-tier digital Britain, with millions of homes and businesses denied fast, reliable broadband.

“Britain needs an independent Openreach, freed from the shackles of BT and able to invest in world-class technology for the whole country, not just parts of it. After years of suffering, customers deserve nothing less.”

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