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February 24, 2016updated 31 Aug 2016 12:46pm

BT CEO promises to up £1bn investment in UK as Ofcom’s Openreach decision looms

News: Gavin Patterson uses MWC 2016 keynote to make a final case for keeping Openreach.

By Alexander Sword

BT CEO Gavin Patterson has taken a final opportunity to argue his case for BT to hold onto Openreach, making a well-timed speech on the eve of Ofcom publishing its digital communications review.

Speaking at a keynote at Mobile World Congress (MWC) in Barcelona, Patterson described the UK as a "very competitive market" and said that Openreach’s presence within the BT Group had allowed it to take a long-term approach to investment.

"The question Ofcom is going to ask is whether the structure is right for the next ten years.

"[Having Openreach as a unit in the BT Group] ensures you get the right investment, the right R&D and ensures you can provide a national service at competitive prices.

"You can do that being part of a wider group. The question that you would have to answer if it was ever separated is whether you would make the same decisions as a standalone business. I very much doubt you would."

Patterson cites the long-term investment cycle that is required to invest in broadband, with returns on investment possibly taking decades to materialise.

He also suggested that the company would invest more if the Ofcom review produced "some regulatory certainty". The company has already pledged additional investment of £1 billion in the UK’s infrastructure.

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"There’s a significant investment that we are ready to make now in the next generation of technology, more fiber to the premise, G.fast (and) fiber to the cabinet," said Patterson.

Patterson expressed BT’s consistent complaint that media interest in the Ofcom review has focused largely on the potential separation of Openreach.

"It’s not simply about Openreach, it looks at all aspects of the market.

"Hopefully it will look at pay-to-view content and it will look at things like wireless and infrastructure competition," said Patterson, citing a market in which Sky, unlike BT, is the biggest player.

BT’s complaint here is that in a world where there is increasing blurring between a telecoms-led bundle and a content-led bundle, the regulatory framework is not consistent.

He also argued that competition was stronger than BT’s critics had suggested. While Patterson said that Openreach is the "one national player" it is not the only infrastructure provider, citing Virgin Media as an example.

With the conclusions of the review due tomorrow, the interventions at this late stage will not make any difference to the overall decision.

BT has been engaged in a fierce PR war with critics including Sky, TalkTalk and Vodafone over the potential split.

"We need to support regulatory frameworks that allow strong competition," said Vodafone CEO Vittorio Colao in his own MWC keynote.

"There is a tendency to say that you either have investment or competition. This is a false ideology; we need to have both investment and competition because we want the future to be healthy for everybody and not just a few."

BT’s opponents, which have to rely on Openreach to provide services to their customers have cited poor service as reasons to separate it from the BT Group.

They argue that there is a fundamental conflict of interest entailed by a BT entity providing services to its competitors.

Vodafone’s Colao has previously claimed that BT and German counterpart Deutsche Telekom are trying to return to dominating European telecoms markets as they did in the days when both were state-owned monopolies.

Ofcom is not expected to compel Openreach to be split from its parent, but CEO Sharon White has warned that it will not allow the "status quo" to continue.

 

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