BT gives Ofcom Openreach confidence

Added by Chris Pateman | Friday 10th March 2017

That's that, then.  BT have now agreed to Ofcom's requirements for the legal separation of Openreach.  No need for Ofcom to impose legislative sanctions, or go to the hassle of legal action or EU interventions.  Well, why not just do that in the first place, then?

Before we all step together in to the bright future that a legally separate Openreach promises to usher in, let's just take stock.  Remember BT chose to announce they were going to give Openreach greater autonomy -- and the appointment of Mike McTighe as chairman of its own board of directors --before Ofcom's conclusions were even made public.  Remember, too, that Ofcom said this was not enough.  Remember it was BT who then appointed Edward Astle, Brendan Barber and Liz Benison as the non-execs.  

There are no industry stakeholders among the non-executives on the new Openreach board.  But there are no former BT employees either.  It is a Board in the operational sense of having responsibility for the management of Openreach’s business.  This is a good thing: it gives us hope that quality of service and the value of Openreach’s engineering workforce will be properly emphasised in the years to come.  But it is not a Board in the sense of being able to raise money from anybody but BT, and on terms which BT alone will dictate.  This we regard as a systematic weakness in the Board’s ability to truly plan and behave like the long-term, steady pay- back player the industry needs a sustainable Openreach to be.  

Remember, too, that one of Ofcom's main objections to pursuing full structural separation was concern about the liabilites of the BT Pension Scheme and its underlying Crown Guarantee.  But now it seems 32,000 employees can be TUPE'd across to Openreach after all, although there will be some delays while secondary legislation is enacted to novate the Crown Guarantee.

FCS welcomes Ofcom’s announcement that BT has now agreed to Ofcom’s requirements for legal separation of its Openreach network division. We look forward to working with the new legally independent Openreach and Board.  We believe it is the first step is in the right direction.  However we remain convinced that – as both Ofcom and the DCMS Select Committee independently concluded -- the only sustainable and truly customer-responsive Openreach is an Openreach which is fully master of its own destiny, structured and managed as a utility company and completely structurally separate from BT. 

Nonetheless Industry needs pragmatic solutions to move forward.  We’re therefore pleased that CPs and Openreach are not, now, facing a lengthy period of procrastination and uncertainty. 

FCS works for the 98% of Openreach’s customer base who account for just 14% of its turnover.  As an industry we need to ensure that the newly constituted Board reflects the desire and aspiration of all Openreach stakeholders and customers.  We therefore call open Openreach, Ofcom and Government to take the next step to create a truly inclusive governance structure and arrangements to allow all Industry stakeholder constituencies to be part of an inclusive and equitable investment decision making process.  FCS is ready to play our part in this proposed governance structure to ensure the development of effective competition and quality networks for the benefit of all customers and stakeholders.