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Vodafone says BT should be made to spin off its broadband network

Rivals want BT to separate off its broadband business completely.
Written by Colin Barker, Contributor
BT's rivals have renewed their calls for the telecoms giant to spin off its broadband network business entirely.

They argue that separating out the broadband network into the BT-managed and owned Openreach did not go far enough.

According to data that has been compiled by Vodafone, and submitted to telecoms watchdog Ofcom as part of the regulator's call for options from all parties, BT has been using "its taxpayer-funded network" to build up a £5.5bn advantage over its rivals.

BT Openreach was established in 2006 following an agreement reached by BT and Ofcom which was designed to ensure that all the telcos had equal access to BT's network.

While this arrangement seemed to work reasonably well for some years, BT's £12.5bn purchase of EE last month has shifted the balance of power.

When Ofcom first announced its own review of BT's position in the market earlier this month TalkTalk and Sky called on the regulator to split the company into two.

According to Vodafone, over the last eight years BT has made a return of £16.7bn by selling products to other telecoms companies. This is more than the £11.3bn rate of return required to compensate investors, a benchmark set by Ofcom.

"BT always says that our figures are wrong," said a spokesperson for Vodafone. "They did it two years ago, so we said that if they were wrong then they should tell us where and by how much. We received no reply then so we keep asking and we have just asked them again. We are still waiting for their reply."

Openreach is "the cash cow that is fuelling BT's growth strategy," the spokesperson told ZDNet. "Their control of the Openreach market is what they use to support all those other investments. We don't have that bedrock rely on and that is what we have been telling Ofcom."

A "declining level of service"

Amongst the complaints Vodafone is "the declining level of service" it says it is getting from BT and as evidence it points to data that, it says, shows an increasing level of faults.

While BT is on something of a roll at the moment thanks to the success of its broadband strategy and its high-profile showing in the market for televised soccer, some analysts see issues ahead.

The telecoms marketplace is going through rapid upheaval. As well as BT buying EE,Telefonica has agreed to sell O2 for £10.25bn to Hutchison Whampoa, the owner of Three UK.

As Ovum analyst, Matthew Howett, practice leader for regulation noted: "The exact timing and next steps in each case remain somewhat unclear given the complexity of what lies ahead, but approval could take up to a year and will almost certainly be fraught."

BT had not responded to a request for comment at the time of publication.

Further Reading:

EE plans £1.5bn 4G network boost

BT snaps up EE for £12.5bn

TPG could buy out Vodafone by next year: iiNet founder

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