TalkTalk: BT Openreach Split Is Only Way To Solve Ofcom’s Concerns

TalkTalk has reiterated calls for Ofcom to separate Openreach from BT, claiming that no concession its rival can offer would be able to resolve the regulator’s concern that BT exerts too much influence.

Representatives from both BT and TalkTalk were present at a Westminster eForum held a week after the publication of the initial findings of the regulator’s once-in-a-decade review of the UK communications market.

Ofcom has admitted problems with the current structure of ‘functional separation’ but will only consider ‘structural separation’ as a last resort. TalkTalk has bemoaned a lack of concrete proposals in Ofcom’s initial findings and said full independence for Openreach is the only course of action.

Irreconcilable differences

“We’re ten months into the process and were disappointed to have a problem statement,” said Andrew Heaney, executive director for strategy and regulation at TalkTalk.

“We’ll wait and see what Ofcom comes up with. It’s clear to us that structural separation is a cleaner and more effective solution. There’s one particular irreconcilable difference [with functional separation]: Ofcom is concerned BT has an undue influence over Openreach investment programmes.”

“BT is milking its copper assets, there’s very little FTTP investment and service is poor.

“When one company owns the only national [network] it’s fairly obvious it will benefit them. The first we knew about G.Fast was when we read it in the press. I’m fairly certain Gavin Patterson [BT CEO] influenced that plan in advance.

“Structural separation will mean Openreach will make investment decisions not just for BT, but all providers and all consumers. We believe that will result in more investment, innovation and uptake.

“The biggest risk is that Ofcom takes the easy route and doesn’t do what’s good for customers.”

Heaney also suggested an independent Openreach would be more transparent. BT has received most of the government funding available for rural broadband deployment from Broadband Delivery UK (BDUK) but has been accused of overcharging the taxpayer.

“There’s a concern that subsidies go into Openreach one door and out the other into football clubs,” he said, referring to BT’s significant investment in sports television rights.

BT defence

Heaney rejected BT’s claims that divesting Openreach would be too difficult, noting O2 was spun off and sold to Telefonica in 2005. He also disputed one of BT’s main justifications for maintaining the status quo – that Openreach benefits from the wider’ group’s technology and capital.

“BT’s R&D division could be divested and transferred to an independent Openreach,” he said. “You don’t need to own the infrastructure to ensure there is investment, you can negotiate anchor tenant-type contracts.”

Heaney expressed a desire for a quick resolution, one of the few things that he and his counterpart at BT agreed on. Julian Ashworth, BT director of policy, said the company has participated as “constructively” in Ofcom’s as it could and defended the company’s record.

“We need an outcome that promotes confidence and stability so we can make quick decisions and investment,” he said. “It is simply too vital for the wellbeing of the UK not to do so.

“Full structural separation would not deliver improvements to investment and service.

“The UK has a happy middle ground of investment and competition … [BT wants] a way forward that builds on it.”

Rivals clash

TalkTalk has frequently accused BT of “sweating” its copper assets rather than building fibre to the premise (FTTP) networks because there is no infrastructure competitor to Openreach. Far from seeing this as a negative, BT has admitted it does intend to sweat its copper using fibre to the cabinet (FTTC) technologies and G.Fast because they are a more efficient and quicker way of delivering speed upgrades.

Sky and TalkTalk are among those who believe investment in FTTP isn’t possible while Openreach is part of BT and want the two to be separated. Both companies are engaged in a FTTP joint venture in York with a view to expanding nationwide, but say such a plan might not be economically viable unless Openreach is separated because a rival network can’t compete for BT’s retail wholesale contract.

Ashworth raised doubts about TalkTalk’s willingness to invest in fibre, claiming TalkTalk too was sweating its copper assets and didn’t offer fibre to the cabinet (FTTC) until two years after Openreach made it available to its customers.

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