Tuesday, July 26, 2016

Ofcom BT proposal is a fudge rather than regulation that UK will need following the EU referendum

Whilst having breakfast today Ofcom published it proposal for BT Openreach following the year long review of how structural separation is servicing the market a decade after it's creation. Ofcom's Chief Executive Sharon White spoke on BBC Radio 4's Today programme to explain what the thinking was on fixing the failed provision of broadband and the fastest way to to turn things around. Her key message was that spinning out Openreach was too complex and would take too long and so forcing BT to create an independent Chair and improved reporting was going to allow changes to take place faster.

BT didn't seem to have any problems splitting Cellnet out and thus should not have issues with Openreach.  The problem this time is the state of the Pension scheme and complex contracts.

After White had left the radio studio her place was taken by BT's CEO and his opposite number at Talk Talk to have their say on the proposal. As could be expected Dido Harding was disappointed that Ofcom did not take a harder line. Gavin Patterson's response could have been a comedy routine at the BT managers away day, his best line was, "BT does not game Ofcom".

Over the past ten years BT has spent £10Bn investing in Broadband Services and in an effort to hold off break up offered to spend £6Bn in the next three years.  Too often consumers and businesses in Britain are complaining that the current infrastructure is woeful and the offer to double spending in the next three years is not going to raise satisfaction.

The 2010 spending review by George Osborne resulted in budgets cuts to Ofcom which means that a review that should have been completed in 12 months will take over two years.  BT and its rivals all have more lawyers and economists than Ofcom and are capable of gaming the regulatory processes.

Some on Twitter seem to think that this is another victory for BT 

John Singleton is the former head of the OFT and he seems underwhelmed by the proposals.

If we want better infrastructure for broadband then it's best served by Openreach becoming a business in its own right and being able to raise capital on its own behalf rather than competition for budget with other BT subsidiaries and group commitments such as Pensions which at the moment is £12Bn in debt. Theresa May's new Industrial strategy hopefully will see the Government reject the proposal and seek BT's break up.

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