BT Openreach deal seeks greater broadband investment

BT’s infrastructure division, Openreach, will split from the company and operate independently, under an agreement with the sector regulator Ofcom. The new operational landscape could bring investment in superfast broadband a step closer. However, the industry’s next flashpoint may be just around the corner.

Openreach was born out of an Ofcom decision in 2005, when a regulatory shake-up of the sector led to the separation of BT’s retail business and its infrastructure. That strategic review also sought to establish ‘equivalence of inputs’ – the right of other communications providers to access services on the same terms as BT.

The new deal means that Ofcom won’t need to impose a change on BT through the European Commission. The threat of an imposed solution seems to have focused minds: Ofcom Chief Executive Sharon White referred to “a distinct change of tone and commitment…in recent weeks”. Meanwhile, BT has acknowledged the negotiations were long and tough, but has declared itself satisfied with a fair outcome.

Openreach will have its own staff and management and control of its own budgets, but its assets will remain owned by BT. That’s good news at least for the company’s pension plans, and a way of avoiding the further delays involved in a sell-off.

BT’s retail competitors also struck a pragmatic note, with Vodafone calling the move “a positive start”, and TalkTalk pressing for a clear timetable for improvements from the new Openreach.

Forthcoming price consultation

Their focus will now turn to Ofcom’s forthcoming consultation on pricing. BT still sets its own superfast broadband prices – a reflection of its investment in the fibre-optic network – but other players are calling for fairer controls. The solution must allow for an investment in Britain’s broadband infrastructure that makes commercial and competitive sense.

An independently run Openreach is unlikely to suddenly see a business rationale for a major investment programme, but the deal with Ofcom removes a regulatory wrangle that stood in the way of a new commercial approach for BT’s infrastructure and the companies that use it.