BT under-investing in Openreach, say MPs

BT is “significantly under-investing” in its broadband infrastructure subsidiary, Openreach, and should put its house in order, according to a committee of MPs.

The report by 11 MPs on the culture, media and sport select committee said BT had underinvested in Openreach which had been “over-earning” and investment had not increased since 2009.

It said investment needed in Openreach could run into hundreds of millions of pounds a year to establish world-class connectivity throughout the UK.

BT appears to be deliberately investing in higher-risk, higher-return assets such as media properties, the report said, and not investing in profitable lower risk infrastructure and services through Openreach.

MPs also said the quality of service offered by BT remains poor. BT have reportedly rejected claims that it had underinvested but acknowledged that customer service could improve.

The report said the committee supported communications regulator Ofcom's proposed plans to separate Openreach and BT.

MPs said if BT does not comply to “offer the reforms and investment assurances necessary to satisfy our concern”, then Ofcom should enforce a separation of the two.

It argued that Ofcom had not placed enough emphasis in the past on improving Openreach's quality of service and the prospect of stiffer penalties should also encourage BT to voluntarily invest more in infrastructure.

BT, which is the UK’s largest fixed broadband provider, has a retail market share of 36%, Sky has 23%, Virgin Media 19%, and TalkTalk 17.5%.

The majority of investment in super-fast fibre and cable connections is from BT and Virgin Media, and both are investing in upgrading their existing networks, but smaller providers such as CityFibre, Gigaclear, Hyperoptic and ITS Technology are also investing in fibre deployments.

TalkTalk chief executive Dido Harding said: "This report puts beyond doubt the need for radical reform of Openreach. MPs have concluded that Openreach is not fit for purpose and is letting Britain down.

"As Ofcom considers how to improve Britain's broadband, it should feel emboldened to know it has cross-party political support to be radical."

The European Union said every household should have access to 100 megabits per second broadband within 10 years. BT would struggle to provide this in rural areas across the UK.

The UK is one of the cheapest for communication services in comparison to the US and leading EU countries.

Shares in BT were down 0.35% to 393.60 at 1006 BST.