Photographer: Chris Ratcliffe/Bloomberg

BT Breakup Is an Option Unless Investment Rises, Panel Says

Updated on
  • Parliamentary select committee urges regulator to get tough
  • Report stops short of rivals’ calls for immediate separation

BT Group Plc is using its control of the U.K.’s main broadband network to favor its own interests and regulators should consider a breakup unless the company steps up investment and gives rivals better access, a parliamentary select committee said.

If BT fails to “offer the reforms and investment assurances necessary to satisfy our concerns, telecommunications regulator Ofcom should move to enforce full separation of Openreach,” as the broadband grid is known, the panel said in a report Tuesday.

Ofcom is expected to issue recommendations for accelerating investment in the country’s broadband grid within days. Rivals such as wireless operator Vodafone Group Plc and pay-TV provider Sky Plc have called for the creation of a separate entity in order to give them improved access, saying the current system hampers service quality and broadband speeds.

“BT has exploited its position to make strategic decisions that favor the group’s priorities and interests,” the panel said. It said BT was underinvesting in the network by as much as “hundreds of millions of pounds a year.”

BT has increased investment in Openreach by 30 percent from two years ago and will step up spending on the network again this year, it said in a statement. The company said it is in discussions with Ofcom in an effort to reach a settlement to increase the autonomy of Openreach without a full separation.

“Separating Openreach from BT would lead to less investment, not more, and would fatally undermine the aims of the committee,” BT said.

But BT’s competitors lambasted the company Tuesday, with one competitor accusing the British telecoms giant of holding the nation in "shackles."

"As Ofcom considers how to improve Britain’s broadband, it should feel emboldened to know it has cross-party political support to be radical," TalkTalk Telecom Group Plc said in a statement. "After years of suffering, customers deserve nothing less."

In May, BT said it would invest 6 billion pounds ($7.9 billion) to roll out super-fast fiber and 4G mobile connections by 2020, provided that Ofcom lets it keep control of Openreach. In preliminary reports on its review of the U.K.’s network infrastructure, the regulator has stopped short of recommending a breakup.

BT shares fell 0.8 percent to 392 pence at 11:48 a.m. in London, paring a loss of as much as 1.6 percent.

— With assistance by Michael Scaturro

(Adds comment from TalkTalk in eighth paragraph.)
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