BT and Virgin Media are the sole suppliers of fibre optic broadband connections to homes and businesses in the UK and, while Virgin Media connects for its own business, other companies such as Talk Talk, Sky and Vodaphone are forced to use Openreach and have been spending years arguing that it should be separated from BT’s other businesses – a view that UK regulator OffCom agrees with. Last week BT announced that it intends to separate OpenReach from its other businesses by creating its own board, although retaining ownership. You’ll want to think about the consequences.
My Figure shows the revenues of the leading UK Telco suppliers by quarter since the beginning of 2008. Like Deutsche Telecom in Germany, Telecom Italia and France Telecom, BT has evolved from being a state-owned PTT – its business shaped by constant interruptions of state regulator OffCom. While it supposedly looks after the interests of customers, many of OffCom’s actions are due to the continuous pressure exerted by other suppliers in this particularly deregulated country. I fail to see how the age-old spin-off of O2 from BT, the combining of Deutsche Telecom and France Telecom’s mobile operations into EE and its eventual acquisition by BT a long time after other EU telcos were allowed to rebuild mobile businesses benefitted UK phone and Internet users.
Rather than worry about whether Openreach’s semi-autonomous status will help with a more effective roll-out of ‘Superfast’ broadband to the more remote corners of the UK (which I’m sure it won’t), my main concern is that Openreach is more likely to be sold off as a result of its separation (as Virgin Media was in 2014 to Liberty Global for $23.3b). It hardly seems in the nationalistic spirit of the UK’s decision to leave the EU that the country’s telecoms infrastructure could fall under foreign ownership… but then again we live in a country in which our future nuclear industry will be built by the French using Chinese money, where our nuclear missiles can be controlled by the American government and where we manufacture millions of cars without having a single national supplier. Don’t get me wrong – I don’t believe that Brexit will be positive for the economics of Britain – just that those who do better get their act together before all our assets are sold off.