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MPs tell BT to 'put house in order' over Openreach or face break-up

Published 19/07/2016

A BT Openreach internet router,
A BT Openreach internet router,

BT must "put its house in order" or face a break-up after failing to invest in its Openreach network arm potentially to the tune of hundreds of millions of pounds a year, MPs have warned.

A scathing report from the Culture, Media and Sport Select Committee claimed BT has "significantly under-invested" in Openreach, which is responsible for rolling out super-fast broadband across the UK.

It accused BT of making strategic decisions that put the group's interests ahead of customers and its Openreach business.

MPs warned if it does not ramp up investment in Openreach and address poor service, Ofcom should force BT to split off the division.

Ofcom stopped short of forcing a full separation of BT earlier this year, but said the group must give the division more independence to avoid a break-up in the future.

BT - which now owns mobile phone group EE - has since pledged to spend £6 billion over the next three years and overhaul customer service to see off the threat of a forced split.

MPs said on publishing their report that while they supported Ofcom's proposals, BT should be broken up if it fails to "offer the reforms and investment assurances necessary to satisfy our concerns".

The report found that, based on information from a panel of independent experts, BT's under-investment could potentially run to hundreds of millions of pounds each year.

The report said BT was "exploiting the position of vertical integration to make strategic decisions that favour the group's priorities and interests, at the expense of its access infrastructure business".

It added that BT "appears to be deliberately investing in higher-risk, higher-return assets such as media properties, and not investing in profitable lower-risk infrastructure and services through Openreach".

The report also claimed BT had "stifled local competition and thwarted other network providers' planning" through its lack of transparency on Openreach costs.

Ofcom likewise came under fire in the report, with MPs saying it was "slow to introduce minimum service standards with financial penalties for Openreach, some nine years after its creation".

MPs said tougher penalties for poor service would encourage BT to invest more in Openreach.

Rival companies such as Sky, Vodafone and TalkTalk have long called for a split between BT and Openreach.

They pay to use the network and have previously complained over poor service and urged the group to replace its ageing network of copper wire.

BT said it was "disappointed to be criticised for having invested more than £1 billion a year in infrastructure when the UK was emerging from recession and rival companies invested little".

A spokesman agreed that service levels needed to improve at Openreach, but said splitting it off would "fatally undermine" the aims of the committee, claiming it would lead to "less investment, not more".

"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," he added.

Ofcom welcomed the MPs' report and said it agrees that Openreach's performance "has not been good enough".

A spokesman said: "We've introduced minimum standards for Openreach's quality of service, getting tougher each year, and we now intend to extend these further.

"We have also made clear that Openreach must become more independent from BT, making investment decisions in the interests of all its customers."

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