Ed Vaizey MP Criticises TalkTalk, Sky and Vodafone for Trying to Breakup BT

The former Digital Economy Minister, Ed Vaizey MP, appears to have taken a different approach to the Government’s position after saying that he was “utterly confused” by those wanting to break-up BT, while singling out TalkTalk, Vodafone and Sky Broadband for specific criticism.

The MP for Wantage in Oxfordshire (England), who was speaking during yesterday’s debate on the Digital Economy Bill 2016-17, began by reciting an email that he had received from the director of the Broadband Delivery UK linked Better Broadband for Oxfordshire (BBO) programme, which highlighted the apparently successful roll-out of “superfast broadband” (24Mbps+).

According to BBO director, some 93% of Oxfordshire can now access superfast broadband (the next goal is 95% by the end of 2017) and £5m has already come back to the county council from the Government funding, with another £2.8m further to come and “he thinks that perhaps we will get it all back because of gainshare [clawback from BT] and take-up“.

“I cannot think of any large scale public sector contract which has delivered on time and under cost. Very good contract to work with in protecting the public purse and incentivising successful outcomes,” said the gleeful BBO director to Vaizey.

Naturally all of this was in the cause of leading up to Ed Vaizey’s follow-up criticism of the large number of MPs and some major ISPs who want to see BT being split from control of their network access division, Openreach.

Ed Vaizey said:

“I confess that I am utterly confused by those people who want to break up BT and Openreach. Why would one simply adopt the campaign of BT’s competitors? Why would one wish to break up a highly successful British company, post-Brexit when we need all the champions we can get? Why would one break up a company that has delivered such a successful programme? In the words of the chief executive of Virgin Media, an able competitor to BT, “If you want better broadband, pick up a spade.” That is my message to TalkTalk, Vodafone and Sky, who all seek for their own reasons to break up a great British company.

I have two things to say to the Minister. I firmly believe that Openreach can deliver the [10Mbps] USO, but it will need his help in easing regulation, particularly for long line VDSL. I also hope that Broadband Delivery UK will continue its excellent work and become a taskforce. A lot of the 5% that still has to be reached is in inner-city areas, and that is usually because of bureaucratic obstacles stopping the roll-out of broadband which have nothing to do with technical challenges. A good and effective BDUK, helping roll-out in cities, would be hugely helpful.

I echo the calls about the frustration with new build. I remember dealing with Linden Homes in my constituency. For the princely sum of £6,000 it could have delivered broadband to all its customers in a multimillion pound development. It point-blank refused to do so. The attitude of too many developers is shocking. The Government refused to change the planning laws when I was a Minister. Perhaps we should look at that again.”

Mind you TalkTalk, Vodafone and Sky Broadband might well choose to point out that it’s rather difficult and expensive to “pick up a spade” when the market is already dominated by one major infrastructure, retail and wholesale provider (BT Group), which rises to two when you include Virgin Media in urban areas (note: Virgin is a closed network).

In those cases the big ISPs feel as if they have little choice but to take what they’re given and Ofcom recognises that Openreach sometimes complicates this because they “still has an incentive to make decisions in the interests of BT, rather than BT’s competitors, which can lead to competition problems” (here). A fair few alternative network ISPs are however finding some success, but often only by focusing on the bits that BT have failed to upgrade.

On the other hand neither Sky, nor Vodafone or TalkTalk have set out a clear plan for investment, coverage and service improvements should Openreach become a fully independent infrastructure company. The ISPs have all hinted at a desire for a wider-scale FTTP/H broadband network, albeit with a focus more on urban rather than rural areas (i.e. the first 60-70% of UK premises). Except most urban areas are already quite well catered for and future upgrades should continue that trend.

At this point Ed Vaizey clearly feels as if his ejection from the role of Digital Economy Minister, which was recently taken up by Matthew Hancock MP, has given him a little more freedom to speak his mind. The only problem is that a large section of cross-party MPs tend to disagree with his position on BT (example).

The Government’s new Secretary of State for the Department of Culture, Media and Sport (DCMS), Karen Bradley MP, also took the opportunity to remind the same debate that Ofcom and BT have yet to reach an agreement over the thorny issue of Openreach’s governance and the option of full separation therefore remains firmly on the table.

Karen Bradley MP said:

“I have been clear that we will not stop or cease until we get the right result. If that means the structural separation of BT and Openreach, this Government are prepared to consider that. Ofcom has made some recommendations. We are looking carefully at them, and Ofcom are consulting on them. We need to make sure we get it right and that we get this delivered, but nothing is off the table.

The Bill will ensure that Ofcom is held to account, but not at the expense of delay and intransigence. As well as holding industry to account, we must of course be supportive. The Bill will bring billions of pounds of benefits to industry. The new electronic communications code recognises that digital connectivity is as important as a connection to water or electricity supplies. Providing new rights to install communications infrastructure will herald a revolution in rural connectivity, bringing the digital economy to all parts of our nation.”

Admittedly Karen isn’t saying anything that we haven’t heard the Government say before over the past couple of months, which somewhat bats the ball back into Ofcom’s court and also gives the regulator a little extra support in the process.

The question now is whether BT will voluntarily agree to the greater loss of control (governance) over their Openreach division or if they would rather risk total separation, with the latter now seeming to be a little more likely given that BT appears to have lost some of its biggest supporters in high-ranking Government circles (e.g. Ed Vaizey).

A BT spokesperson said the operator was “making significant voluntary changes that we believe meet [Ofcom’s] concerns and remain hopeful that a voluntary settlement can be reached,” although clearly no deal has been done.. yet. Meanwhile Ofcom continues to push for Openreach to “become a ring-fenced, ‘wholly-owned subsidiary’ of BT Group, with its own purpose and board members,” which BT isn’t happy about.

UPDATE 8:38am

We’ve had a related comment on the 10Mbps USO pledge from the Broadband World Forum, which follows yesterday’s debate over the new bill.

Emma Hosgood, Programme Director (Broadband World Forum), said:

“The Government’s plans to make 10 Mbps broadband a Universal Service Obligation by 2020 is music to the ears of businesses and consumers across rural Britain, with many still limited to speeds of only 1 Mbps. But, with the exponential growth of connected devices in the age of IoT, as well as new digital services such as 4K Ultra HD streaming, 10Mbps may well not be enough to support the booming digital economy over the next decade.

While promises of more investment in fibre-to-the-home [FTTH] suggest certain hubs across the UK could in fact benefit from much faster connectivity speeds, there is a big question around how the Government’s Digital Economy Bill will be funded. Will it be the taxpayers’ or the service providers’ responsibility? What about other companies such as Skype, Facebook and Netflix, which potentially stand to benefit most from improved broadband speeds?

These are issues that need resolving if the UK is to remain a world leader in the digital economy. They will be high on the agenda when the most influential voices in the industry come together at Broadband World Forum in October this year.”