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Experts have their say about the landmark deal separating Openreach from BT

Almost two years since Ofcom started its review of digital communications, the regulator finally reached an agreement with BT over Openreach. But what do the experts have to say about this turn of events?
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Openreach is of great value to the UK given that it brings most landlines and broadband to buildings across the nation. It comes as no surprise then that the government nearly marched to Brussels to seek approval to legally separate it from BT. There’s no need, however, as a deal has finally been struck.

The settlement will see Openreach become a separate company with its own board – but ownership of assets remains with BT. The hope is that it will ensure the UK telecommunications market remains one of the most competitive in the world, with Openreach’s 32,000 staff giving equal treatment to all customers – even BT rivals such as TalkTalk and Sky.

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Will this mean faster broadband? Not straight off the bat. Only two per cent of the UK receives ultrafast broadband via fibre-optic lines – compare that to Japan’s 70 per cent. Countries such as Hungry, Turkey and Mexico have better statistics as well. So while BT CEO Gavin Patterson maintains it will be a step in the right direction, what do experts think of the deal?

A voluntary agreement has always been the preferred outcome, claimed Matthew Howett, practice leader of Ovum’s regulation and policy advisory service. He added that the EU route Ofcom had planned to use was uncertain and untested, “and would likely have taken much longer to conclude”.

The expectation, Howett claimed, is that BT will look at its investment program, particularly in terms of extending the fibre footprint. It also seems the company was willing to support the government’s universal service obligation for broadband, conditional upon reaching the right settlement with Ofcom.

“Now that it has been achieved, plans can be developed. But there is no doubt that not everyone will be satisfied with this conclusion. Although BT complied with everything the regulator asked for, some of BT’s largest competitors were hoping for a full structural separation of the two. Throughout the process, Ofcom has reiterated that a structural separation is off the agenda. Only if Ofcom’s monitoring suggests a legal separation is not delivering sufficient benefits, will it return to the question.

“And although the announcement marks an important end to a prolonged period of uncertainty, questions remain around how Ofcom proposes to monitor and enforce change. Ofcom will perhaps conduct a short consultation on the removal and replacement of the existing undertakings that govern Openreach. There are also issues for the government to address with regard to the BT pension scheme.”

Likewise, Andrew Ferguson, editor of thinkbroadband.com, proclaimed his hopes for “Digital Britain” to emerge from its long stasis now that the deal has been made solid – but added that changes have already taken place.

“The Openreach board have already met,” he explained. “However, there is lots of hard work to be done in transferring 32,000 employees to work directly with Openreach and while we may not see immediate product changes, with better control over its investment decisions we will hopefully see a bigger investment in staff on the frontline. This will translate into better fault repairs and an accelerated roll-out of full fibre.

“The UK’s full fibre revolution has been going on for a long time, but the mass behind it is growing and we are seeing evidence for some of the 2m promised full fibre premises passed by 2020 with lots of city centre areas that have missed out on superfast services before now in line for fibre to the premises. I am hopeful Openreach will look at expanding this significantly beyond 2020 and while the current belief is that G.fast will be the dominant technology in a decade’s time, there is a real chance full fibre may beat it with the right investment decisions.

“The message is clear, 2017 is the time to start the hard work. What many don’t realise is the fibre to the cabinet service that started to deploy in 2009 was always built with the fibre network ready to support fibre to the premises at a future date. So rather than having fibre in just 5,500 exchanges, Openreach today has fibre ready to some 81,000 locations and just needs the workers, budget and ambition to push this out.”

But there are some glaring issues, Dave Millett of independent telecoms brokerage Equinox, told Real Business. The split does not address the poor service levels of Openreach. He queried: “Will customers be able to talk directly to Openreach and get compensation for missed appointments and delays? There is no mention of penalties if Openreach miss targets – which has consistently happened. And while BT will provide money for the investment, will it be enough given the £1.2bn it has just spent on football rights and the £10bn owed to the pension fund?

“Whilst BT will consult with the likes of SKY and Talk Talk over its strategy, those firms all have residential TV products to sell. Who therefore is speaking up for the businesses that don’t have access to fibre and the fact the UK is bottom of the fibre the premise league tables in Europe? What about the fact that BT can still veto who is appointed as CEO. How much influence therefore will BT continue to exert?”

We’ll have to wait and see.

This article is part of our Real Business Broadband campaign, which seeks to provide a mouthpiece for business leaders to vocalise the broadband issues preventing their businesses from reaching full potential. We’d love to hear your take on the debate and where you think the UK needs to make drastic changes. Get in touch via email (shane.schutte@realbusiness.co.uk) or join in on the action using #rbBroadband.

Image: Shutterstock

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Shané Schutte

Shané Schutte is a senior reporter at Real Business, with a particular specialism in employment and business law, human resources, information technology and sales/marketing.

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