The new broadband utility and the openreach debate

 

 The prime Minister has said that we should have, by right, access to fast broadband and it should be thought of like the services for electricity, water, transport and all the other utilities. He is absolutely right, but the implications of treating broadband as a new utility are quite profound. Broadband is now a core essential service, everybody needs it, the economy relies upon it, and the absence of fast broadband has become a serious detriment to businesses and lots of people, particularly in rural areas who cannot access even basic services.

To turn the PM's ambition into a reality, the immediate task is to set up Openreach as a stand-alone broadband utility, tasked with the roll out of fibre and the delivery of this new universal service. Inside BT, it is unlikely to deliver what is needed. BT’s incentives are not clean: it has the revenues from its copper wires to protect, and its ambitions to provide a broad range of services, including TV, put it in direct competition with other users of its broadband network. Furthermore, BT’s cost of capital is likely to be higher than that of a stand alone utility, and as result investment will be more costly and hence lower. To leave BT in charge will risk a repetition of all the problems which were experienced with the British Gas example. In the end, detailed and intrusive conduct regulation cannot overcome the problems created by BT’s deep conflict of interest, and only a clean structural separation, and a focus solely on providing fast universal broadband will have a chance of meeting the Prime Minister’s objective.

 

 

 

 

 

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