After finally sealing regulatory approval to complete its £12.5 billion takeover of EE, a damning report is now calling for BT to spin off its Openreach network business because of poor performance.
The report, entitled “Broadbad”, backed by more than 120 cross party MPs as part of the so-called British Infrastructure Group (BIG), argues Openreach has so far received £1.7 million in subsidies from taxpayers to connect harder to reach areas of the UK, “but has repeatedly failed to deliver”.
The report states that 42 per cent of small to medium sized enterprises in the UK are experiencing connectivity problems, while 29 per cent also report poor service reliability. The group estimates poor internet connections is costing the economy up to £11 billion per year.
Due to BT’s failings, approximately 5.7 million people in the UK have connections that do not reach Ofcom’s acceptable minimum speed of 10Mb/s, with 3.5 million of these living in rural areas.
After BT completes its merger with EE, the report noted the UK incumbent will have a 40 per cent share of the mobile market, adding to its 70 per cent share in wholesale.
“The time has come for BT to be forced to sell off Openreach to encourage more competition and a better service for every internet user and for the benefit of the UK economy,” stated the report.
Rivals in the UK broadband space have repeatedly called for a shake-up of BT’s Openreach, which was established in 2006, and operates the main system of cables connecting homes and businesses in the UK to broadband services.
The likes of Sky, Vodafone and TalkTalk have led the calls for Openreach to be spun off from its parent.
BIG added that BT has been frequently accused of abusing “the natural monopoly it has over the nation’s network and not giving equal access to other internet providers”.
“It should also be pointed out that Openreach has historically generated the majority of BT’s profits leaving a big question mark over what incentives BT has to invest properly into the broadband infrastructure.”
Openreach accounted for approximately 34 per cent of the company’s operating profit last year.
It is thought BT will try to leverage mobile operator EE to diversify its offering and launch quad play services, selling broadband, fixed, mobile and TV services in one package.
BT CEO Gavin Patterson has reportedly hit back at the report, stating that an Openreach spin off would create uncertainty in the market.
He did however also concede the division needs to do more to promote broadband in rural areas.